Does Next plc’s Trading Update Spell Trouble Ahead For ASOS plc And Supergroup plc?

So much for the swans!

Britain faces longest winter in 50 years after earliest ever arrival of Siberian swan

This was a headline across the media back in October of last year. By all accounts the UK was facing a long, hard winter after the first Bewick swan, which traditionally heralds the start of the season, arrived from Arctic Russia. The first bird arrived on 11 October, 25 days earlier than the prior year and the earliest date on record.

I’m no fan of constantly defrosting my car before the perilous commute to work on partially gritted roads. But as an investor, I do hope for a cold snap in September and October that usually causes consumers to pop to the shops to pick up the latest full-priced winter coat or sweater.

Fortunately, I didn’t bet the farm on my favourite retailers purely on the basis of an article in the media. That proved to be a wise move as most retailers have been trending down of late – as can be seen in the chart below.

It ain’t half hot mum!

As predicted by some savvy traders, NEXT (LSE: NXT) kicked off the seasonal reporting with a less-than-well-received update on Tuesday. Management pointed to warm weather as being the main reason for a difficult fourth quarter. But to their credit, they also pointed to mistakes and challenges faced by the business – specifically, at NEXT Directory where disappointing sales were compounded by poor stock availability from October onwards. In addition, they also highlighted that the online competitive environment is getting tougher as industry-wide service propositions catch up with the NEXT Directory.

More pain to come?

So with the weather mainly to blame for the disappointing showing at NEXT, does this mean that investors should be worried about growth stars ASOS (LSE: ASC) and SuperGroup (LSE: SGP)?

Well, a trader I’m not, and as far as I’m concerned, the market has been pricing-in the warm weather for some time now. Just look at the one-month chart below that shows all three companies’ share prices falling as it became clear that the harsh winter failed to materialise, along with the associated sales.

In my view, investors should remain focused on company fundamentals. It appears to me that shares in both ASOS and Supergroup have fallen more in sympathy with the fall in the share price at NEXT.

Furthermore, so far I haven’t seen analysts trimming their EPS forecasts for the year for either company, though of course a rethink would be required if either warned on profits.

Looking at the past reporting patterns, I believe that both are due to issue trading statements next week. This should give us an insight to each company’s performance over the festive period.

As both businesses are clearly growing, they come with a rather warm rating. SuperGroup currently trades on around 20 times forward earnings, while ASOS, on a price-to-earnings basis, trades on around 52 times forecast earnings making it one of the most expensive shares in the market. Should forecasts be missed, we could see the shares of both companies sell off. That could be an opportunity to open a position in two quality companies in my view.

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Dave Sullivan has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended 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.