Despite ongoing Brexit uncertainty and a looming election, not every retailer is suffering at the moment. Fast-fashion growth stock Boohoo (LSE: BOO) is a great example with today’s reassuring-if-really-rather-brief update pushing the shares back towards their all-time high.
Trading has “remained strong” since the end of H1, according to the £3.5bn-cap online giant, “with a record performance across the Black Friday weekend.” Somewhat unsurprisingly, Boo has therefore continued to trade “comfortably in line with market expectations,” suggesting an earnings upgrade could be just around the corner.
Despite no longer being a holder of the stock, I continue to see this as a classy outfit and certainly one I’d own over peer ASOS, thanks to its bullet-proof balance sheet and the high returns generated on the capital it invests.
The fact that new additions Karen Millen, Coast and MissPap have all been integrated — and initial ranges “very well received” — is also both unsurprising and a further endorsement of the company’s growth strategy.
As usual, the only drawback to owning a top growth stock like this is the high valuation (57 times earnings before markets opened this morning). While I don’t think owners should necessarily jump ship yet, I’d be tempted to wait until after some inevitable profit-taking has occurred if I were intent on building a position from scratch.
Also bucking the trend
Another exception to the all-retailers-are-suffering ‘rule’ has been jewellery seller Ramsdens (LSE: RFX). Revenue from this part of its business rose 22% to £5.5m over the six months to the end of September.
But this market minnow is more than just a play on our love for things that sparkle. Having exchanged £340m to more than 500,000 customers over the reporting period, income from its currency exchange business was up 15% to £8.4m — not bad considering how weak sterling has been as a result of our EU departure being delayed.
The rise in the price of gold over the period was also reflected in the £4.1m gross profit made on precious metals purchases, up 57% compared to the same period in 2018. A 17% increase (to £4.3m) in income at its pawnbroking arm rounded things off nicely.
All told, revenue and underlying pre-tax profit improved 30% and 12% respectively, with CEO Peter Kenyon saying the company “remains confident” of meeting its full-year expectations following a “solid start” to H2. Given that it’s growing its estate at a time when many retailers are closing stores, this looks very achievable.
Three new sites were opened during H1 with another added since the end of the reporting period. Four stores were also captured following the demise of rival The Money Shop. Despite these outlays, the company continues to boast a strong balance sheet with net cash of £12.3m.
But Ramsdens is more than just a prudently-managed growth story. It’s also a great income stock, evidenced by today’s 13% increase to the interim dividend (to 2.7p per share).
Before this morning, analysts had penciled in a 7.24p per share total cash return in FY20, covered 2.8 times by expected profits. That equates to a very satisfying yield of 3.6% based on today’s share price.
I’ve been a holder of Ramsdens for some time now and, based on these numbers (and the fact that the shares still trade on a little under 10 times forecast earnings), there’s no danger of me selling anytime soon.
