Should You Buy NEXT plc, Ted Baker plc Or Jimmy Choo PLC?

NEXT plc (LON:NXT), Ted Baker plc (LON:TED) and Jimmy Choo PLC (LON:CHOO) all reported solid results on Thursday, but which should you buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investors in NEXT (LSE: NXT), Ted Baker (LSE: TED) and Jimmy Choo (LSE: CHOO) should have been pleased by their companies’ results this morning, but shares in all three firms have fallen since markets opened, as investors responded to a more cautious outlook from NEXT.

As I write, shares in NEXT are down 4%, Ted Baker is down 3%, and Jimmy Choo is off by 3.5%.

Let’s take a look at the results behind these losses, and see how each of these firms performed last year:

2014 growth

NEXT

Ted Baker

Jimmy Choo

Sales

+6.9%

+20.4%

+6.4%

Adj. earnings per share (eps)

+14.7%

+20.6%

+7.6%

Dividend

+16.3% (excluding special dividend)

+19.6%

n/a

There’s nothing much to be concerned about here, I’d suggest, so the problem must be a combination of each firm’s outlook and its current valuation.

Slow start to 2015

In its outlook statement, NEXT says that some of its collections are not performing as well as they were at this point last year, and admits that last year’s strong sales — due to early spring weather — make comparisons tough for the year ahead.

As a result, NEXT only expects sales to grow by between 0% and 3% during the first half of 2015, with sales growth picking up in the second half to give full-year growth of between 1.5% and 5.5% — significantly lower than the 6.9% reported for 2014.

What about Ted and Jimmy?

Although it targets more upmarket customers and does more business abroad than NEXT, much of Ted Baker’s profit comes from the UK, and I reckon the firm could face some of the same headwinds as NEXT.

However, the outlook for Jimmy Choo is entirely different. The luxury shoemaker targets affluent customers all over the world and reported particularly strong growth in Asia, where sales rose by 34.5% thanks to strong demand in China.

Today’s best buy?

Ted Baker looks a little expensive for my taste, trading on 28 times 2015/16 forecast earnings, with a prospective yield of just 1.7%.

For growth investors, I reckon Jimmy Choo looks more promising. Earnings per share are expected to rise by 35% in 2015, giving a forecast P/E of 22 — not unreasonable for a growth stock.

However, my choice would be NEXT: the retailer’s 20% operating margin held firm last year, and it returned 300p per share to shareholders through ordinary and special dividends.

I don’t think 17 times forecast profits is too much to pay for this kind of quality, although I might be tempted to wait a little longer to see if the shares show any further weakness.

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 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.

More on Investing Articles

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Still cheap as chips! What’s wrong with the IAG share price?

Harvey Jones can't believe just how low a value markets are putting on the IAG share price. He wants to…

Read more »