In light of this ripe economic backdrop, I am laying out the investment case for three of the UK’s best fashion outlets.
Marks & Spencer Group
Much has been made of Marks & Spencer’s (LSE: MKS) (NASDAQOTH: MAKSY.US) struggle to transform its beleaguered Womenswear section, and last month’s interims — which showed like-for-like general merchandise sales slip 2.1% during September-December — has done nothing to soothe these fears.
Although the firm still has much to mull over to revitalise this division, Marks & Spencer continues to witness electrifying growth in other high-growth areas. Indeed, the retailer’s intensive, multi-channel approach to bolster revenues pushed internet sales via M&S.com 22.7% higher during the period, while its store-building programme and franchise-expansion drive in developing markets helped to deliver International sales growth of 4.5%.
City analysts expect Marks & Spencer to punch a 4% earnings decline for the year ending March 2014, but a strong recovery is expected thereafter — growth of 12% and 11% is anticipated in 2015 and 2016 respectively.
JD Sports Fashion
Hoodie and trainer house JD Sports Fashion (LSE: JD) continues to lead the way in the field of ‘sports fashion’, and strong demand for its sportswear during Christmas has seen group like-for-like sales accelerate from the growth figure of 5.8% noted during the first half of the year.
The company is also seeing its fortunes improve at its Blacks and Millets camping outlets, helped by the recent installation of new management. And on top of building its presence online, JD is also rapidly expanding its portfolio of stores on the continent, having acquired a string of outlets in Germany and Holland during the summer as well as opening new shops in Spain and France.
Brokers expect the firm to follow up a 20% earnings advance for the 12 months concluding January 2014, results for which are due on Tuesday, April 1, with rises of 17% and 9% in 2015 and 2016.
British design house Ted Baker (LSE: TED) is making serious waves across the waves as well as at home. The company punched unbelievable growth of 18.4% during the 8 weeks to January 4, and although rapid store openings were responsible for 10.9% of this figure, this still leaves impressive like-for-like growth of 7.4%.
The company launched its new online outlet at the end of last year, a move that should herald further sales inflows looking ahead. Meanwhile Ted Baker is also enhancing its footprint in emerging markets. Another store opening in Hong Kong during the period takes the total there to three — adding to the four on mainland China — while it also opened a new outlet in Turkey recently.
Ted Baker boasts a terrific earnings record in recent years, with growth having rattled along at a compound annual growth rate of 15% since 2010. And City analysts predict the firm to punch a further 21% advance for the year ending January 2014 — results for which are scheduled for Thursday, 20 March — and advances to the tune of 17% and 15% in the following two years.
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> Royston does not own shares in any of the companies mentioned in this article.