Folli Follie Neutral (from Outperform) Mkt. Price: 18.65
Retail High Risk (from High Risk)
Target Price: 21.20 – Previous 24.00
FTSE Market: 380.27
Downgrade to neutral on low FCF visibility albeit strategy change
Folli Follie will focus its strategy in electronic sales, store consolidation and opex reductions in order to face growing challenges in all markets.
This shift could bare significant fruits in the long term allowing for the much awaited positive turn in FCF, also supported by better WC management.
Nevertheless, midterm capex needs could increase and restructuring costs might make WC challenging.
On top of that exogenous factors like FX fluctuations and economic turbulence and endogenous like the weak track record in producing a steady positive FCF stream, increase the risk for the stock.
For these reasons we downgraded the stock recommendation to ‘Neutral’ from ‘Outperform’, on a lower target price of €21.2/share (AFe old €24/share).