Todays update from Supergroup (LSE: SGP) is highly encouraging and shows that the fashion retailer is making good progress under its new management team. Retail sales for the 11 weeks to 10 January increased by 17.8%, with like-for-like sales growing by 12.4%.
Such strong sales figures are very welcome for investors after Supergroup delivered a profit warning just a few months ago due to weaker than expected sales of its outerwear, which was mainly caused by unseasonably warm weather. Although it did discount the excess stock, the cold weather after Boxing Day helped to push sales of outerwear higher, with the performance of its e-commerce division helping to boost sales further.
In addition, Supergroup has maintained its full year pre-tax profit guidance of 60-65 million which, when you consider that it will include the loss of a major wholesale customer (Bank Fashion has gone into administration), it would be a great result for the company. As such, shares in Supergroup are up strongly today at +8% today.
Another Trading Update
Also updating the market today is Burberry (LSE: BRBY) (NASDAQOTH: BURBY.US). Although its third quarter sales were in line with expectations, with them rising by 15% year on year and being up 8% on a like for like basis, trading in Hong Kong was weaker than expected. This contributed to sales growth in Asia being in the low single digits and, in addition, the weakness in Hong Kong is particularly relevant for Burberry since it is a high margin market for the company. Furthermore, adverse exchange rate movements are also contributing to a difficult year for the business and, looking ahead, Burberry expects further challenges in its markets in future months.
Despite this, Burberry is still forecast to grow its bottom line by 9% next year which, given the slower than expected growth in key markets such as Asia, would be an excellent result. In fact, that rate of growth is set to be matched by a lower price point retailer, Next (LSE: NXT), which is also due to report earnings growth of 9% next year. Clearly, both companies offer excellent potential for investors and come with a significant amount of customer loyalty, which means that their sales figures should be relatively robust moving forward.
However, when it comes to growth, a lower price point operator, Sports Direct (LSE: SPD), seems to offer better prospects. It is forecast to grow its bottom line by 14% next year and, in addition, it trades on a more appealing valuation than either Burberry or Next. Certainly, its brand loyalty is lower, with its customers being far more price sensitive than those of Burberry or Next, but its price to earnings growth (PEG) ratio of 1.2 is far more appealing than those of Burberry (2.2) and Next (1.8).
When it comes to growth at a reasonable price, though, Supergroup appears to be considerably more enticing than either Burberry, Next, or Sports Direct. Thats because it is forecast to deliver earnings growth of 17% next year which, when combined with a price to earnings (P/E) ratio of 15.6, equates to a PEG ratio of just 0.9. As a result of this, it seems to be the best buy of the four stocks, with its trading statement showing that it has huge long term potential as a multi-channel fashion retailer.
Despite this, there are 5 other stocks that the analysts at The Motley Fool think could be worth buying ahead of Supergroup.
In fact, the analysts have written a free and without obligation guide called 5 Shares You Can Retire On which highlights the companies’ enticing growth prospects and super-low valuations. As such, they could be worth adding to your portfolio and may help to make 2015 and beyond an even more prosperous period for your bottom line.
Click here to find out all about them – it’s completely free and without obligation to do so.
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.