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Fashion Fight: Should You Buy NEXT plc, ASOS plc Or Marks and Spencer Group Plc?

Today I am running the rule over three of the country’s biggest clothing retailers all vying for your custom.

NEXT

Despite the effect of heavy discounting across the High Street, NEXT (LSE: NXT) continues to defy these pressures and punch excellent sales growth, Indeed, full-price sales advanced 2.9% from late October to Christmas Eve, drawing envious glances from many of its retail peers and driven by its red-hot Next Directory catalogue and online division.

The business has long been a dependable provider of year-on-year earnings growth, and City brokers do not envisage this trend ending anytime soon. Indeed, the business is expected to have punched growth of 9% for the year concluding January 2015, and further expansion to the tune of 9% and 8% is chalked in for fiscal 2016 and 2017 correspondingly.

Although NEXT’s share price has leapt 13% during the past six weeks, I believe that the business still provides excellent value for money at the current time. The clothes house changes hands on a P/E multiple of 16.6 times forward earnings for this year and 15.4 times for 2017, loitering around the value benchmark of 15 times.

On top of this, I believe that NEXT is one of the best income stocks on the market given its splendid record of awarding special dividends, a phenomenon that is expected to drive the total payment for 2015 to 301.4 per share from 129p the previous year. Current projections point to dividends of 169.6p this year and 184p in 2017, creating yields of 2.3% and 2.5%.

Although by no means a guarantee, of course, I would expect final payouts for this year and next to exceed these current projections should the company continue to outperform on the shop floor.

ASOS

Online operator ASOS (LSE: ASOS) has undertaken plenty of heavy lifting over the past couple of years to help supercharge growth, and this work finally appears to be paying off handsomely. Indeed, I expect the business to put to bed a history of profit warnings which has weighed on the share price during the past 12 months.

ASOS reported last month that group sales advanced 15% during the six weeks to January 9, underpinned by a tremendous 27% leap in revenues in the UK. Although sales abroad rose by just 5% during the period, this is an encouraging sign that recently-introduced zonal pricing is starting to pay off in overseas territories. And I expect foreign turnover to gain momentum as warehousing and distribution improvements in the US and Europe kick in.

The company is expected to record another earnings dip during the 12 months to August 2015, although an estimated 6% dip compares starkly with an 11% drop in fiscal 2014 and 51% collapse in the prior year. And ASOS is finally expected to flip back in the right direction from next year, and a solid 27% improvement is currently pencilled in.

It could be argued that the company still has plenty of work to execute to get growth moving resolutely higher in the long-term, and that P/E multiples of 64.8 times for this year and 51 times for 2016 do not fully reflect this. Still, I believe that ASOS’ massive investment across the globe leaves it in good stead to enjoy robust sales growth in the coming years.

Marks and Spencer Group

British retail institution Marks and Spencer (LSE: MKS) remains something of a conundrum. Despite the amount of time and effort ploughed into revamping its Womenswear proposition, the firm’s fashion lines remain out of favour with clothes shoppers and like-for-like demand slumped 5.8% during October-December.

On top of this, sales at its electrifying Food division also slowed during the period with underlying revenues rose just 0.1%. Meanwhile the effect of diminished spending power and adverse currency movements drove total international sales 5.8% lower.

As a result of these near-term pressures, earnings at Marks and Spencer are anticipated to stagnate for the year concluding March 2015. But the bottom line is expected to take off thereafter as aggressive expansion in emerging markets kicks off, innovation at its online proposition at home and abroad boosts sales, and the company’s ambitious Simply Food store expansion programme cottons onto surging demand for premium food with grocery shoppers.

Indeed, the bottom line is predicted to rise 9% and 8% in fiscal 2016 and 2017 correspondingly. As a result Marks and Spencer changes hands on a more-than-reasonable 13.8 times for this year, a figure which slides to just 12.6 times for 2017.

In addition, Marks and Spencer also offers terrific dividend prospects, with expected payout hikes — from a predicted 17.7p per share for this year, to 18.7p and 20.1p in 2016 and 2017 correspondingly — driving the yield from 3.6% to 3.9% and then 4.2%.

I believe that each of the firms above are in terrific shape to enjoy improving retail conditions at home, not to mention the surging progress of e-commerce in Britain and abroad. Accordingly I reckon that any or indeed all would not look out of place in any strong stocks portfolio.

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Royston Wild owns shares of Next. The Motley Fool UK owns shares of ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.