London fashion week startstoday and is a reminder that the UK often leads the world in the stylestakes. Couldthese three companies add a bit of style to your portfolio?
Handbags At Dawn
Global style guruBurberry Group (LSE: BRBY) was big in China until it was tripped upby a combination of the Communist Party crackdown on luxury givingand the wider slowdown in the worlds second-biggest economy.
Burberrys share price has subsequently collapsed faster than a supermodel stumbling in her catwalk heels, crashing 25% in the last sixmonths. Yet it still trades at a premium price of 17.8 times earnings, and its fundamentals are solid, with operating margins of 17.5% and return-on-capital-employed of 33%. Forecast earnings per share (EPS) growth areflat for the year to March 2016, but is expected to hit 10% the following year. With buoyant Chinese M3 money supply figures suggesting a sharp rebound in the months to come, now could be the ideal time for investors to get with it.
New store openings, strong US growth, rising beautyrevenues, a healthy balance sheet and global easy money policies that benefit the wealthy should help Burberry stay in vogue.
Marks Loses Its Spark
Marks & Spencer Group (LSE: MKS) has been a fashion disaster foryears, the group only being saved by its food and home divisions. M&S took a recenthit from recent disappointingsales figures footfall slumped inAugust, according to the BRC- Springboard retail survey, sticking the boot intothe M&Sshare price.
The truth is that M&Slost its flare for fashion a long time ago. On the rare occasions I venture into its clothing sections I despair even its Oxford Street store remains locked in the 1970s. Yet respectedhead of womenswear, Francis Russell, appears to have been a victim of office politics rather than a serious attempt to haul the chaininto the 21st-century.
M&Sneeds an utter transformation to ditch its fusty image and attract younger shoppers, butseems too frightened of losing its older customer base to get down with the youth. Maybe it should just stick to ready meals.
The Luxury Gap
There is only so much you can charge for a luxury handbag and expect to keep the revenues rolling in and Mulberry Group (LSE: MUL) charged too much.
Management has had to retrace its steps after charging too far upmarket recent cuts in prices on its leather bags has helped boost sales. But the damage was done, withits most recent full-year figures showing revenues down9% to 148.7m and pre-tax profits down87% to 1.9m.
It worries me that management got its market positioning so wrong. Didsuccess goto its heads? The result is that its share price has fallen even faster than its bag prices in recent years. It peaked at 25 in 2012, now you pay just 8.33. Yet it trades at a crazy 428 times earnings.
Analysts remain extraordinarilyoptimistic, forecasting earnings per share growth of 149% in the year to March, but that still only reduces the P/E to 168 times earnings. Mulberry has avertedacomplete fashion disaster, but it still isnt my bag.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Burberry. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.