Are ASOS plc And Boohoo.Com PLC Better Growth Buys Than Struggling MySale Group PLC?

MySale Group PLC (LON:MYSL) has crashed following today’s profit warning: are ASOS plc (LON:ASC) and Boohoo.Com PLC (LON:BOO) any safer?

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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 firm’s newer markets — Asia, the UK and US — trading was “more challenging” in MySale’s original markets of Australia and New Zealand, partly due to increased competition.

This suggests to me that MySale’s business model — selling other retailers’ discounted old stock to its mailing list — is easy to duplicate, and lacks defensive qualities.

Given that MySale’s share price has now fallen by almost 50% since the firm’s flotation in June 2014, I think it’s worth taking another look at some of the main alternatives in the online fashion sector.

ASOS

ASOS (LSE: ASC) (NASDAQOTH: ASOMF.US) is the biggest of the UK’s online-only fashion retailers. With sales expected to rise by nearly 20% to £1.2bn this year, ASOS is becoming a significant player.

Despite this, ASOS has disappointed markets this year. The firm’s 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.

What’s more, ASOS’s 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

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 firm’s 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 it’s too late for big gains from ASOS, and I’m concerned that MySale’s 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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. 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.

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