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Supergroup plc’s Sales Growth Accelerates: Is It A Better Buy Than ASOS plc, Ted Baker plc & Debenhams Plc?

Supergroup (LSE: SGP) announced its full-year results today. Underlying earnings per share (EPS) rose 1.9% to 59.1 pence, on revenue growth of 12.9% in 2015. After a slow start to the financial year, because of unusually mild weather last year, sales picked up strongly towards the Christmas period. Gross margin over the year also improved by 120 basis points to 60.9%.

With earnings broadly in line with analysts’ expectations, Supergroup had continued with the progress made in the Autumn/Winter season. Its trading update showed retail sales grew 34.5% over the previous year, in the 10 weeks leading up to 4 July 2015. Like-for-like sales growth was 20.3% alone, with the remainder of the sales growth coming from an expansion of its international stores count. Average retail space grew 19.5% to 767,000 sq. ft. over the past year.

Under its new management team, the company has continued to expand the global appeal of the innovative British premium lifestyle brand. The company is expanding across Europe, and in March 2015 it bought back the exclusive rights to distribute Superdry products in North America. In addition, it has a 50:50 joint venture with Trendy International Group to sell its products in China.

The acceleration of sales growth shows that the brand is still fashionable, and has broad appeal across different age groups, between genders, and also internationally. With continued scope for international expansion, we should expect fairly strong earnings growth to come. Shares in Supergroup currently trade at a P/E of 21.8. But with forecasted earnings growth of 12%, it has a forward P/E of 19.7. Supergroup, which currently does not pay any dividends, intends to pay its first dividend in 2016.

ASOS (LSE: ASC), the online fashion retailer, has seen its revenues almost triple over the past four years to £975 million. Earnings, on the other hand, has been fallen in recent years, as margins have collapsed.

ASOS has a lofty P/E valuation of 77.4; and with forecasted earnings set to decline by another 4% this year, its shares trade at a forward P/E of 90.5.

Ted Baker (LSE: TED) is a much more mature British fashion brand. But sales growth has been more impressive, with revenues rising 24% in the 18 weeks leading up to 6 June. The company also has a strong record of sustained earnings growth, with adjusted EPS having more than doubled in just four years.

However, its shares are valued at a pricey forward P/E of 31.5, despite very optimistic forecasts of continued earnings growth of 20% to 100.1 pence per share in 2015.

Department stores owner Debenhams (LSE: DEB) saw like-for-like sales grow just 1% in the first half of its financial year, despite improving consumer confidence. This seems to suggest that it is the department stores’ product line-up and store layout that is holding back the retailer.

Debenhams pays a modest dividend yield of 3.9%. With forecasted underlying EPS growth of just 1%, its shares currently trade at a forward P/E of 12.1. But, because earnings growth is likely to be low or non-existent in the medium term, its valuation seems fairly priced. 

In conclusion, shares in Supergroup seem to have a better balance of earnings growth and P/E valuations. The catalysts of the company starting to pay dividends and sustained sales growth momentum could see Supergroup outperform these other shares in the medium term!

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Jack Tang has no position in any shares mentioned. 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.