On Thursday, BMO Capital Markets updated its outlook on Leon's Furniture (LNF:CN) (OTC: LEFUF), increasing the price target to C$24.00 from the previous C$23.00, while maintaining a Market Perform rating on the stock. The adjustment follows the company's first-quarter results for 2024, which were reported to align with expectations.
Leon's Furniture witnessed a same-store sales growth (SSSG) of 9.0%, surpassing the forecasted 4.5%. This growth was attributed to a higher gross margin, which improved by 50 basis points year-over-year. However, this benefit was balanced out by an increase in selling, general, and administrative expenses (SG&A), resulting in flat margins. The company also experienced a 9.7% rise in EBITDA during the quarter.
The sales momentum for Leon's Furniture is reported to have carried into the second quarter of 2024. Despite this positive trend, the management has expressed a note of caution regarding the macroeconomic environment. BMO Capital Markets believes that Leon's is in a strong position to navigate potential near-term challenges and may even capture additional market share, owing to its solid brand reputation and value delivery to customers.
Moreover, Leon's Furniture has indicated that the initiation of a Real Estate Investment Trust (REIT) Initial Public Offering (IPO) is a key focus in the near term. The company's decision to proceed with the IPO will depend on the improvement of market conditions.
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