Release Date: November 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Max Stock Ltd (XTAE:MAXO, Financial) reported a third-quarter revenue of ILS373 million, marking an 18% growth compared to the same period in 2023.
- Comparable store sales increased by 9.2%, driven largely by volume growth.
- The company achieved a 25% increase in adjusted EBITDA and a 35% increase in adjusted EPS attributed to shareholders.
- Max Stock Ltd expanded its gross margin by approximately 270 basis points over a three-year period, reaching 41.3%.
- The company has generated significant free cash flows, with a cash conversion rate of 53% on average since 2017, and actively returns this to shareholders through dividends and share repurchases.
Negative Points
- Gross margin experienced a 60-basis-point decline due to higher logistic costs related to the new distribution center.
- The closure of branches and reduced operating hours during the Swords of Iron War negatively impacted same-store sales in October 2023.
- The company's operations in Portugal have been underperforming, leading to a strategic decision to cease operations there.
- The closure of the Portugal operations has negatively impacted adjusted pre-IFRS 16 EBITDA by approximately ILS3.2 million year to date.
- The transition to a new logistics and distribution center has temporarily impacted cash flows due to intentional inventory build and increased CapEx.
Q & A Highlights
Q: Can you elaborate on the factors driving the 18% revenue growth in the third quarter of 2024?
A: Nir Dagan, Deputy CEO and Head of Finance, explained that the growth was driven by a 9.2% increase in comparable store sales due to volume growth and the addition of 6,000 net square meters of selling space over the past 12 months. The shift of the Jewish New Year holiday into the fourth quarter also played a role in the timing of sales.
Q: How has the new distribution center impacted gross margins?
A: Nir Dagan noted that the gross margin was 41.3%, with a 60-basis-point decline from the previous year due to higher logistics costs associated with the new distribution center. However, this was offset by 120 basis points of expense leverage on higher sales volume.
Q: What are the long-term growth trends for Max Stock?
A: Nir Dagan highlighted a revenue CAGR of 13.4% from Q3 2021 to Q3 2024, with gross margin expansion of 270 basis points to 41.3%. Adjusted EBITDA and EPS have also shown significant growth, with CAGRs of 15.9% and 15%, respectively.
Q: What is the status of the store expansion strategy?
A: Talia Sessler, Chief Corporate Development and IR Officer, stated that six new stores were added or expanded in the past year, increasing net selling space by 10%. The company plans to open four additional stores over the next two years, maintaining a target of three to five new stores annually.
Q: Why did Max Stock decide to cease operations in Portugal?
A: Talia Sessler explained that the decision was strategic due to the intense competitive landscape in Portugal. The closure is expected to be completed by the end of next year and is not anticipated to significantly impact future performance, as Portugal operations have already negatively impacted adjusted EBITDA by ILS3.2 million year-to-date.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
