On Monday, BMO (TSX:BMO) Capital Markets adjusted its price target for Leon's Furniture (LNF:CN) (OTC: LEFUF), increasing it to Cdn$30.00 from the previous Cdn$28.50, while keeping a Market Perform rating on the stock. The adjustment follows the company's third-quarter results for 2024, which were reported to align with expectations.
Leon's Furniture experienced a slight decline in same-store sales growth (SSSG), recording a -1.4% change, which did not meet the anticipated +2.5% forecast by analysts. Despite the lower gross margin (GM), the company managed to maintain its year-over-year EBITDA margins steady due to leverage in selling, general and administrative expenses (SG&A). Nevertheless, EBITDA saw a marginal decline of -1.5%.
The company's performance was influenced by a challenging consumer spending environment, which overshadowed the gains in market share during the quarter. Leon's management has expressed a cautious stance regarding the macroeconomic outlook for the remainder of 2024. Despite these headwinds, BMO Capital believes that Leon's Furniture is in a strong position to navigate through the near-term challenges.
The analyst highlighted Leon's Furniture's robust brand equity and value proposition to customers as key factors that could support the company in achieving further market share gains. Additionally, the prospect of a Real Estate Investment Trust (REIT) initial public offering (IPO) is still considered a priority for Leon's Furniture, although it is dependent on favorable market conditions.
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