Books Books Books!!!

The recent run-up in the share price could also have to do with a recent very favourable write-up in the Investors Chronicle.In an article entitled "A damn good read " published on 19 December, the IC stated the following:

The company is a paradox. Its mission statement reads: "On the one hand, Ottakar's is a national book chain striving to offer uniform excellence in range and service across over 100 branches. On the other hand, it is a collection of intensely individual bookshops, run with great autonomy by staff whose commitment to books is matched only by their commitment to provide a bookselling service tailor-made for their communities."
Its unorthodox approach to retailing pays dividends to both its customers and its shareholders too: "Take, for example, the bookseller's unorthodox approach to the launch of the latest Harry Potter book, The Order of The Phoenix, last June. By transforming its stores, which opened at midnight on the day of the launch, into Harry Potter grottos with live owls and snakes, the company gained an edge over rival retailers. Over 80,000 copies of JK Rowling's best-seller flew off Ottakar's shelves in the first 24 hours alone."
Then there MD James Heneage's soft spot for Tintin.It is one that could pay big dividends for the company after Ottakar's struck a deal to be the exclusive supplier of Tintin merchandise until 2006. The hope is that the long-awaited Steven Spielberg Tintin film will go into production within the next couple of years, bringing lucrative retail revenues Ottakar's way. Around a quarter of the 117 stores now have a dedicated Tintin area.
The IC adds that apart from a novel approach to book launches to reel in the readers, the company has also expanded its chain by acquisition in recent years. Eight branches of Thin's Booksellers were snapped up for £1.5m in March 2002 from the administrators, providing the company with a greater presence in Scotland and southern England - and adding 44,000 sq ft of selling space to the chain.
A year later, Ottakar's pulled off another shrewd deal buying 24 branches of Hammicks Bookshops for £3.6m. Apart from extending the company's geographical presence and generating further economies of scale, the board also saw the potential to raise store margins and boost sales by exploiting the Ottakar's brand name. In the first 21 weeks of ownership, underlying sales at the Hammicks Bookshops, now renamed Ottakar's, increased by 4 per cent.
But even without the sales uplift from Hammicks, Ottakar's figures, according to the IC, still make for a very enjoyable read. Underlying group sales in the six months to 2 August 2003 rose by a stellar 8.7 per cent. True, the magic of Harry Potter was partly responsible, but even without riding the Hogwarts' Express, like-for-like sales still rose by almost 6 per cent. That's one percentage point higher than the organic growth rate of the whole UK books market. And with a strong line of titles for the all-important Christmas trading period - including David Beckham's My Side and Robert Harris' Pompeii - there is every reason to expect this trend to continue.
The article concludes that shares in Ottakar's have had a fantastic run this year but that there should be more upside to come. The board is due to give a Christmas trading update to the stock market on Thursday 15 January 2004, which should confirm that it has raised profits from £5.46m last year to £7.8m for the 12 months to 31 January 2004. Analysts are pencilling in another large jump, to £9.7m, for the year to 31 January 2005, which gives EPS of around 30p, valuing the business on just over 12 times prospective earnings.
With the distinct possibility of upgrades to these estimates next year, as the company concentrates on growing organically rather than by acquisition - the plan is to add between 50,000 to 70,000 sq ft of selling space a year to the current 500,000 sq ft estate - investors, says the IC could do far worse than book into Ottakar's now.