LBY Libbey Inc
Sector financial performance:
This company, which primarily designs, produces, and sells tableware products, has been grouped into furniture – manufacture& wholesale sector in furnishing industry.
Demand for the glass tableware products from individual consumers has been weak in the past several years as indicated by the continuingly sluggish sales to retail clients. However, rising price in market of 2018 may be a positive signal for increase in demand from personal consumers.
Demand from foodservice clients seems to be weak as well after entering 2017 as a result of slowing down traffic of restaurants. However, rising price in market of 2018 may be a positive signal for increase in demand from food service providers.
As a result of decreasing demand in the past several years, companies have focused on competition of price to try to keep sales volume and, while it seems that market has had positive reactions to lowered price as seen among individual consumers and restaurants clients, the resulted increase in volume has not been able to offset the impact on profit/margin from the decrease in price. We thus see that companies’ gross margins continued to shrink in the past several years. However, we also see that companies in this sector have been able to charge more for their products since beginning of 2018, which may imply an increasing demand. A typical company’s gross margin has been seen down from about 24% of 2014 to about 19.5% in 2018. The average SG&A as percentage of sales also went up as sales went down and caused the operating margin down to about 4.4% in 2018.
The typical average stock Price/cash flow ratio: 30 (interest/EBI ratio of 85%) and stock price/sales ratio is 0.2.
It seems that the downward trend in the demand for products of this company in the past several years may be making a turn in 2018 as indicated by continuously increase in sales to companies, retail and food service providers.
The first six months of 2018 compared with 2017
Organic sales in US& Canada increased by about 2.3% (5.4% for 2Q) attributable to increase of 7.3% (17.5% for 2Q) in sales to companies (higher volume) and increases of 1.1 %( 7.7% for 2Q) in retail sales and increase of 1.1% (1.3% for 2Q) in sales to foodservice (mainly due to increase in price).
The 2017 compared with 2016
Organic sales in US& Canada decreased by about 0.8% attributable to decreases in retail sales and sales to foodservice (mainly due to decrease in price) offset by increase in sales to companies (mainly increase in volume).
2016 compared with 2015
Organic sales in US& Canada decreased by about 2% attributable to decreases in retail sales (mainly due to decrease in volume) offset by increase in sales to foodservice. Sales to companies were flat.
Fiscal 2015 compared with 2014
Organic sales in US& Canada increased about 3.2% attributable to increase in foodservice sales offset by decrease in retail sales (volume).
Its gross margin has been improved slightly in 2018 but still lower than 21% of 2016 primarily due to deleveraging of expenses as a result of decreased sales. In addition to the improved SG&A as percentage of sales in 2018, its operating margin has thus gone up to about 4% in 2018.
This stock currently has an enterprise price/EBI ratio of about 15($2.2). We think that its stock is being relatively slightly undervalued with its peers considering its brands’ ability to maintain declining licensing revenue.