Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
magazineMoss Bros is measuring up for growth
Despite worsening sentiment towards domestic retailers some select names continue to look set for growth.
Among them is Moss Bros (MOSB), the men’s tailoring specialist. The business has a number of growth initiatives underway. Cantor Fitzgerald analyst Mark Photiades has a ‘buy’ rating and 130p price target for Moss, implying 27% upside.
The analyst sees scope for Moss Bros to add more than £40m of incremental sales over the medium term and ‘potential for profit to nearly double from current levels’.
Tailor-made for growth
The £107m cap’s solid AGM update (19 May) revealed 5.5% retail like-for-like sales growth for the 15 weeks to 13 May, impressive given a strong performance in the same period last year.
Moss is opening new, profitable stores, while its store refit programme and suit personalisation service Tailor Me should continue to drive growth. Moss Bros’ new season’s ranges are performing well, albeit gross margins came under pressure in the 15 weeks due to the reintroduction of a mid-season sales in April amid tougher clothing market conditions.
Like-for-like hire sales were down 14.2%, reflecting a late start to this year’s wedding season (due to a late Easter) and a change in the way Moss takes deposits, one designed to put pressure on the competition. The good news is many of the main hire events are yet to come, including the summer wedding season and school prom season.
Online and overseas
Moss Bros has two trial stores in the UAE, although management sees online expansion as the more significant international opportunity short term; the offering should resonate with overseas customers given Moss Bros heritage and the world renowned reputation of British tailoring.
For the year to January 2018, Cantor forecasts 4.3% pre-tax profit growth to £7.2m (2016: £6.9m), rising to £7.6m then £8.3m thereafter. Though the shares trade on a punchy 18.3 times forecast earnings of 5.6p, Moss offers a 6% yield based on a forecast dividend of 6.2p (2017: 5.9p). Its shareholder reward is underpinned by a net cash balance sheet.
Moss Bros is cash rich and has growth initiatives underway. Buy at 102.5p.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
