The Motley Fool

16% sales growth makes Joules Group plc my star retail buy

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.

At a time when a number of UK listed retailers are reporting disappointing results, today’s update from fashion brand Joules (LSE: JOUL) really stands out. The company is performing well and has been able to grow its top line by 16% in the first half of the current year. However, there are a lot more reasons to buy Joules for the long term.

Encouraging performance

As well as an increase in sales versus the same period of last year, the company’s margins have also expanded. Gross margins have increased by 100 basis points against last year’s comparator as a result of a higher proportion of full-price sales, better distribution facilities and a favourable product mix within wholesale.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

In terms of its top line increase, Joules performed well in both a retail and wholesale capacity. Its increasing footprint, better performance from new and core ranges, as well as a growing customer base all positively impacted on its performance. Retail revenue also benefitted from the opening of 10 new stores alongside improved e-commerce performance. Meanwhile, wholesale was boosted by international expansion, the launch of kidswear in the US and the strong performance of the autumn/winter range.

Growth outlook

Clearly, the UK retail sector has endured a turbulent 2016. Looking ahead, Joules and the rest of the fashion industry faces an uncertain future. Brexit is likely to cause higher inflation thanks to a weaker pound. This could lead to falling consumer spending as a result of inflation potentially being higher than wage growth over the coming years. In such a situation, it would be necessary for retailers to either reduce prices or else accept lower sales growth.

However, in the case of Joules it has an upbeat outlook and low valuation which provide it with a wide margin of safety. For example, in the current year it’s expected to report a rise in earnings of 23%, followed by additional growth of 16% next year. This puts it on a price-to-earnings growth (PEG) ratio of 1.2, which indicates that now is a good time to buy it.

A better option?

Of course, Joules is a growing brand which has potential. However, it lacks the same degree of customer loyalty a more established, lifestyle brand such as Burberry (LSE: BRBY) offers. Burberry may have endured a challenging period, but with a new management team and a sound strategy which continues to focus on emerging markets and technology over the long run, it has the potential to record improved performance.

For example, in the next two years it’s expected to record a rise in earnings of 14%. While it trades on a PEG ratio of 2.3, the lower risk profile it offers versus sector peers means that Burberry remains a sound long-term buy. Clearly, Joules has superior near-term growth prospects and is worth buying, but for the long term its sector peer could be the better option.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Peter Stephens owns shares of Burberry. The Motley Fool UK has recommended Burberry. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.