There’s a lot to like about Superdry (LSE: SDRY). And I’m not talking about the quality or design of its Japanese-inspired products, although I am quite partial to some its leather goods.
Rather, I’m speaking about the exceptional opportunity that the FTSE 250 company offers to long term investors.
My Foolish colleague Peter Stephens recently touched upon the measures Superdry is undertaking to bolster the appeal of its brands, including a more active approach towards its digital and social marketing campaigns. And these make it a particularly-exciting stock for growth and income seekers alike.
You see, the steps it is taking to improve its position as a so-called Global Digital Brand makes me bullish about where Superdry’s profits are heading. Away from advertising, the clothing colossus continues to invest vast sums to bolster its online capabilities, including the rollout of country-specific websites for the US and Switzerland most recently.
These steps are really paying off handsomely and e-commerce revenues at Superdry boomed 25.8% during the 12 months to April, a result that drove retail revenues for the group 9.2% higher during the period, to £548.6m. And the business expects internet-generated sales to rise by mid-to-high-teen percentages in the current fiscal year alone.
Store expansion continuing too
The rampant growth of online shopping at the expense of the high street has seen Superdry row back its store expansion programme, and it now expects to grow its directly-owned retail space by between 4% and 5% this year versus its prior target of 8%.
But that is not to say that its shops do not still have a critical role to play. Its store expansion scheme is critical in furthering the strength of its brand in established territories as well as hot new growth markets like the US and China. What’s more, Superdry is taking steps to ‘digitialise’ these outlets in a bid to keep customers streaming through the door.
City analysts see no reason why the fashion star can’t continue reporting strong earnings expansion and they are forecasting profits rises of 13% in both the next two fiscal years. And so the number crunchers are predicting that dividends should continue their march northwards as well.
More special dividends to come?
Superdry threw out a 31.2p per share dividend last year, and the City is predicting further growth to 36.9p and 41.5p in the years to April 2019 and 2020 respectively.
Yields subsequently stand at a solid-if-unspectacular 3.1% and 3.5%. Though if Superdry follows last year’s lead and throws out a special dividend — a 25p per share supplementary reward was paid last year — then income chasers really will have a lot to shout about. I expect payouts at the business to remain on the right side of ‘generous’ for years to come.
Right now Superdry can be picked up for next to nothing, its forward P/E ratio of 11.3 times sitting well inside the widely accepted value territory of 15 times and below. Given its bright revenues prospects around the globe, and particularly online, I consider the clothing retailer to be a bona-fide bargain at the current share price.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.