Shares in MySale Group (LSE: MYSL) fell by 40% when markets opened this morning, after the online flash sale retailer admitted that sales have only risen by 4% over the last five months, and said that profits would be materially below market expectations this year.
Interestingly, MySale said that although sales were rising strongly in the firms newer markets Asia, the UK and US trading was more challenging in MySales original markets of Australia and New Zealand, partly due to increased competition.
This suggests to me that MySales business model selling other retailers discounted old stock to its mailing list is easy to duplicate, and lacks defensive qualities.
Given that MySales share price has now fallen by almost 50% since the firms flotation in June 2014, I think its worth taking another look at some of the main alternatives in the online fashion sector.
Despite this, ASOS has disappointed markets this year. The firms shares price is down by 55% so far in 2014, and a series of profit warnings have caused analysts to cut earnings per share forecasts for the current year by 26% in the last three months alone.
Whats more, ASOSs growth appears to be slowing. Although UK sales rose by 24% during the last quarter, international sales fell by 2%, leaving total sales just 8% higher hardly enough to justify trading on 64 times 2014/15 earnings, in my view.
Boohoo.Com (LSE: BOO) is a fast-growing own-brand retailer run by a group of experienced fashion industry veterans who have previously supplied goods to a number of well-known UK retailers.
Sales rose by 31% during the first half of this year, and the firms full-year profits are expected to rise by around 50% this year, and by 35% next year. This puts Boohoo shares on a forecast P/E of 37 for 2014/15 and 27 for 2015/16, making them much cheaper than ASOS.
Which retailer should I buy?
I suspect that its too late for big gains from ASOS, and Im concerned that MySales growth appears to be slowing so rapidly in its established markets.
In my view, Boohoo.com is the pick of the bunch, and could deliver decent gains to investors over the next year.
However, investing in highly-rated growth stocks is always risky: as we’ve seen with MySale Group and ASOS this year, disappointing growth can trigger a brutal share price slide.
Spotting firms that have the ability to deliver real growth, year after year, is one of the seven market-beating techniques covered in “7 Simple Steps To Seeking Serious Wealth“.
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