As some choose tosleep off their Christmas Day indulgencesthis morning, others will be hitting the high street or jumping onlinewith the aim of bagging a few bargains in the sales. I think thats a shame, particularly as buying shares in great businesses rather than spending any surplus cash on stuff people didnt want in the first place shouldlead to a lot more happiness over the long term.
As such, I think investors could do a lot worse than investigatetwo marketnewbieswithencouragingplans for growth in 2017: posh chocs retailer, Hotel Chocolat (LSE: HOTC) and lifestyle brand, Joules (LSE: JOUL).
Since coming to the market in May,shares in Royston-based Hotel Chocolat haveshot up a tasty 43%. Such a greatreturn in only sevenmonths is even more impressive considering the seismic political events that have occurred since.
When you consider its last set of results in October however, such a rise isnt all that surprising. With revenue climbing 12% to 91.1m (including a 20% jump in online sales) and profit after tax soaring229% to 6.7m, the company seems to be doing all the right things. Given the popularity of affordable but luxurious products at this time of the year, Id be amazed if this momentum hasnt been sustained in the run up to Christmas.
Another top growth opportunitycould be Joules. Like Hotel Chocolat, the share price of the 189m cap wobbled in both July and November. Since results on 7 December revealed a 16.2% rise in group revenue (to 81.4m) for the last six-month period however, its shares have done well. Again, I see no reason to question why trading over the festive period will have reversed, especially as consumers for now appear undauntedby the potential consequences of Brexit.
As things stand, shares in Hotel Chocolat and Joules trade on high forecast price-to-earnings (P/E) ratios of 38 and 25respectively. Clearly, there are a lot of other retailers on lower valuations out there.Nevertheless, fixating on P/E ratios isnt ideal, particularly when scrutinising companies that have clear strategies for growth.
According to CEO Angus Thirwell, Hotel Chocolatsthree strategic priorities for 2017 are to continueinvestingin itsmanufacturing operations, growits store estate and develop itsonline business. These plans, alongwith the companys appealing more cocoa, less sugar approach, potential for overseas expansion and vertically-integrated supply chain,make me rather bullish on the 300m capsprospects.
Meanwhile, cash-generative Joules has plans to targetmarkets such as the US and Germany. This could be hugely beneficial, given that internationalsales currently account for a only small proportion of total revenue. Elsewhere, the company has alreadyremarked on strong growth in its wholesale order book for spring/summer next year, suggesting that it will begin 2017in fine health.
There will always be winners and losers as far as the Christmas trading period is concerned, of course. Indeed, things are onlylikely to get worsefor some retailers in 2017, as rising inflation leadsconsumers tobecome even more selective about where they choose to spend their money. For Hotel Chocolat and Joules however, next year could see their share prices rise even higher so long as both companies follow through with their plans.I think theirrelatively steep valuations are justified.
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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.