Toy retailer sees brisk sales growth in current quarter

Greece’s top toy retailer Jumbo expects double-digit sales growth in its fiscal first quarter that started in July, its chairman said in an interview. In May, the company forecast sales growth of 9 to 10 percent and net profit growth of 8 to 9 percent for the 12 months ending June 2007. Chairman and General Manager Tolis Vakakis told Reuters yesterday he would wait until the end of the calendar year on a possible revision. Jumbo, which operates 41 stores in Greece and Cyprus, started selling toys in the 1980s but expanded into the more profitable stationery and seasonal home products businesses as low birth rates limited growth in its domestic market. «The first quarter of the new fiscal year, which will be completed in a few days, will show a double-digit growth rate in the top line,» Vakakis said. «It is one of (the company’s) weak quarters and as a result we cannot judge the accuracy of our (full-year) guidance until after the end of December when the second quarter, which is the most important one, is completed.» In the year from July 2005 to June 2006, Jumbo’s net profit climbed 45 percent to 49.4 million euros ($63 million), with sales up 23 percent to 281 million euros on the back of new stores. The company has a market capitalization of around 700 million euros. Vakakis said Jumbo plans to open five department stores in the greater Athens area in the next three years to increase its 32 percent share in the 850 million euro Greek market. «Our market share could rise to 38 percent very easily but things are getting tougher after this point,» he said. Balkan expansion Jumbo’s plans to expand to Bulgaria and Romania, which are expected to join the European Union next year, will offer new growth opportunities. «We hope our entry in the Balkans opens new horizons for us since the size of the Greek market is defined,» Vakakis said. The retailer is in the process of building a department store in Sofia, and has bought land to build a second one, hoping to open two or three stores simultaneously by 2008. «There should be at least two or three, so that costs would not run us over,» Vakakis said. He added expansion in Romania, where Jumbo is looking for land, would begin after the Bulgaria operation is set up. Jumbo will pay out 35 percent of its 2006/07 profits to shareholders. This would result in a 0.31 euro dividend per share, according to Reuters calculations. It paid a 0.22 euro dividend last year. Jumbo trades at 13 times its 2006 estimated earnings, at a discount to 16 for the European leisure products sector, according to analysts in Reuters Estimates. Its shares have gained 53 percent year-to-date, outperforming the broader Greek market by 42 percentage points.