Looking over the FTSEs retailing sector, today Im comparing the top dedicated of fashion and clothing.
Ive picked the four biggest by market cap, which give an interesting spread between the FTSE 100 and AIM. They are NEXT (LSE: NXT), Burberry (LSE: BRBY), ASOS (LSE: ASC) (NASDAQOTH: ASOMF.US) and Mulberry (LSE: MUL).
Heres a snapshot of their current fundamentals:
|Index||FTSE 100||FTSE 100||AIM||AIM|
|Year ended||Jan 2014||Mar 2014
|Year ending*||Jan 2015||Mar 2015
|Year ending*||Jan 2016||Mar 2016
The Mulberry price collapsed in January on a profit warning after significant wholesale order cancellations from Korea. Its recovered a little, but at 750p its 23% down over 12 months. Mulberry sells high-priced leather goods, particularly handbags, so its is a very specific retailer with no diversification should handbag fashion change and if theres one thing that fashion does, its change.
A maker of handbags valued on a forward P/E of 56? Im running away before Lady Bracknell gets here.
Not that I have much clue how ASOS finished the year to August 2013 on a P/E of 95, either! The online clobber retailer posted some amazing growth in its early years, but when youre starting from zero and defining an online marketplace, rapidly upward tends to be where you go in the short term.
But meteoric rises dont go on forever, and ASOS has faltered once or twice. The share price has been erratic, too. In 2011 it reach the heights of 24 before crashing back to less than half that. But that was nothing in March this year ASOS reached 70 per share, and then slumped back to todays 25.68!
I dont want rides like that, especially as theres no telling what growth is left for ASOS in a market that is rapidly maturing.
What about Burberry, which looks more sensibly valued on a forward P/E of just under 20? Burberry is very much a brand that is sold on its name whatever this years Burberry look, people want it because its Burberry, not necessarily because they actually like it. Its a one-brand company in the most fickle of businesses, and thats just too risky for me.
That leaves NEXT, which I see as a very different proposition. NEXT goes for decent quality, stylish clothes at sensible prices. And when it comes to working out what is going to sell each year, NEXT has the knack of consistently getting it right. And its turning that into steadily rising earnings, with five years of double-digit EPS growth prior to the 15% forecast for this year.
And at 7,213p, its shares are on relatively modest forward P/E ratios of 16 to 18.
NEXT is a company growing organically and selling its wares on a timeless combination of quality and price, and its very well managed. Its the only one Id consider out of this lot.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Burberry. The Motley Fool UK owns shares of ASOS. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.