Should You Be Concerned About Slowing Growth At Burberry Group plc, Halfords Group plc And Moneysupermarket.com Group plc?

Growth slows at Burberry Group plc (LON:BRBY), Halfords Group plc (LON:HFD) And Moneysupermarket.com Group plc (LON:MONY).

| 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.

Burberry (LSE: BRBY) released its first-quarter trading update today. Comparable growth sales slowed to 6%, slightly missing analysts’ expectation of 7%. For the same period last year, comparable sales grew 12%; and for the 2014/5 financial year, comparable sales grew 9%. Sales on a like-for-like basis declined in the low-single digits in Asia Pacific, as trading conditions remain difficult in Hong Kong, whilst comparable sales in Mainland China grew by a low single-digit percentage.

Elsewhere, it’s a rosier picture. Comparable sales continued to grow steadily in Europe, the Middle East and the Americas, with high single-digit to double-digit growth rates. Burberry is targeting further growth from the Japanese market, where it had opened five new stores in the past quarter.

The expiry of the licensing agreement with Sanyo Shokai to use the Burberry brand in Japan in June 2015 will allow Burberry to expand its presence there directly through opening new stores. As Burberry gains access to the high margin retail operations and has greater control over the brand’s image; the end of the licensing agreement should be very positive for the brand in the long term.

Burberry’s reliance on the higher-margin Asia Pacific market means it has been particularly hard hit by China’s anti-graft campaign. Although worse may still be yet to come, longer-term fundamentals for the luxury market in Asia remain broadly intact. Its valuation has also come down significantly, with its shares valued at 19.9 times 2015 expected earnings.

Shares in Burberry fell 2.2% to 1,582p in morning trading.

Halfords

Halfords’ (LSE: HFD) like-for-like revenue growth of 3.5% for its first quarter disappointed investors. Prior to the announcement, analysts had expected like-for-like revenue growth would have exceeded 4%. Like-for-like retail sales growth slowed from the 7.9% figure achieved last year, as weak car cleaning sales dragged sales 0.3% lower in Halford’s Car Enhancement division.

Shares in Halfords fell 1.6% to 541 pence today; but they are still 15% higher than since the start of 2015. Valuations remain fair, as full year sales and earnings expectations remain unchanged. Even with slower earnings growth, analysts expect underlying full year EPS will grow by 3% to 35.1 pence. This gives Halfords a forward P/E of 15.4.

Moneysupermarket.com

Moneysupermarket (LSE: MONY) also released its trading update today. Revenue growth for the three months leading to 30 June slowed to 10%, from 25% in the previous quarter. Home Services, which includes price comparison for energy utilities and telephone, saw growth moderate to 31%, from 141% in the previous quarter. But, this was not unexpected.

Money services, which includes price comparison services for credit cards and current accounts, continues to grow fairly rapidly, with revenues growing 16% on the same quarter last year. Insurance revenues grew 10% in the quarter, as it noticed a pickup in motor insurance premiums.

Although Moneysupermarket’s forward P/E is 21.6, the company’s long term growth prospects are intact. Revenue growth is likely to remain relatively high, as consumers have become increasingly price conscious and more willing to switch services. But this is offset by increasing competition in the sector, including from Google‘s own price comparison service. As its forward P/E is in excess of its historical average of less than 20, it may be wise to wait for a pull back.

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.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Burberry and Moneysupermarket.com, and owns shares in Google. 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 For Beginners

Here’s how I’m trying to prevent a stock market crash from ruining my portfolio

Jon Smith explains which shares he's avoiding and what he's thinking of buying to try and protect his portfolio from…

Read more »

Bearded man writing on notepad in front of computer
US Stock

Call me crazy, but here’s why I’m eyeing up the CrowdStrike share price

Jon Smith notes the carnage caused by Friday's global outage, but flags up why he's thinks the CrowdStrike share price…

Read more »

Investing Articles

What do Hargreaves Lansdown results mean for the share price?

The Hargreaves Lansdown share price has surged in recent months on takeover expectations, but what will the recent results mean…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Newly minted S&P 500 stock CrowdStrike just crashed! Here’s why

Shares of S&P 500 firm CrowdStrike collapse as the company lies at the centre of a global IT outage. What…

Read more »

artificial intelligence investing algorithms
Investing Articles

Is Nvidia heading for the mother of all tech stock crashes?

Nvidia stock has soared, and the company briefly became the most valuable on the planet. But not everyone’s an AI…

Read more »

Dividend Shares

The BP share price is down 15% in 3 months. Time to buy?

In the space of just a few months, the BP share price has fallen by a double-digit percentage. Is this…

Read more »

Investing Articles

A 5.4% dividend bargain I’ll buy over Lloyds shares

Harvey Jones loves his Lloyds shares but now he's found a high-yielding FTSE 250 stock that may offer even more…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Recommended by Warren Buffett, this top hedge fund’s betting on Rolls-Royce shares

When Warren Buffett ended his previous investment partnership, he recommended Bill Ruane’s Sequoia Fund. Today, its largest investment is in…

Read more »