Moss Bros posts solid first half and gets City ́s nod

The first half of 2015 has been of spectacular growth for Moss Bros (MOSB), mainly driven by online sales, the suit hire business and its foray into the Middle East. With total sales for the period jumping by 10 percent to 61.3 million pounds, the formal menswear retailer has gained the City´s approval.

First half of the year has been "another period of strong progress for the company," according to Moss Bros chief executive Brian Brick.

Its online store has been the brightest business unit, as e-commerce revenue has advanced an impressive 55 percent jump, therefore now representing 10 percent of total group sales. The latter improved by 10 percent to 61.3 million pounds in the 26 weeks to August, 1 and were up 9.7 percent on a like-for-like basis.

Strong e-commerce performance leads Moss from strength to strength

“Across the rest of the business, the launch of its new Moss Bros sub brands last Autumn contributed to growth, as did a strong e-commerce performance with overall sales up 59 percent. E-commerce now accounts for 10 percent of total Group revenue and international sales online account for 3.1 percent of online sales. A two-store pilot it is trialing in the Middle East will help it understand its international sales potential further,” highlights Maureen Hinton, Group Research Director at Conlumino.

Other key figures such as a retail gross margin (+1.4 percent) also delivered sound growth, helping pre-tax profit leap by 44 percent to 2.8 million pounds, while period-end cash stood at 19 million pounds.

Investors were also please as the company advanced that the interim dividend will be increased by 5.9 percent to 1.8 pence a share.

“Moss Bros has continued to benefit from the continuous improvements it has made to the business over the past couple of years, producing a strong performance across all of its divisions, including its Hire wear business, which had been underperforming,” recalls Hinton.

Of a similar opinion is Wayne Brown, an analyst at broker Liberum, who stresses that "The investment made to support its sub-brands, e-commerce platforms and the broadening of its Hire ranges is clearly driving significant growth." He adds that "Not only would it be near impossible to replicate its market representation within Hire and the Retail suit market but the investment case offers a 13 percent 5-year earnings per share compound annual growth rate, and a dividend yield of over 6 percent."

Regarding future plans for growth, City analysts have rewarded the apparel retailer by upgrading their forecast. On a related note, Brick has stressed the growing contribution of foreign branches of the brand. “Dubai is a huge shopping destination and there is a big expat community, who are familiar with our name.”

On the back of the news, Moss Bros shares rose 5 percent to 96 pence Tuesday afternoon, yet still trade at a 30 percent discount to peers, according to Brown., who has a target price on the stock of 120 pence.

"The shares offer an operating [free cash flow] yield that is comfortably in double digits (12.9 percent 2016E rising to 14 percent in 2018E). Trading on an EV/EBITDA of only 7.2x and a PE of 20.5x in the financial year to Mar 2016E for a five year EBITDA CAGR of 9.2 percent and earnings CAGR of 12.8 percent, is attractive in our view," concluded Brown in a note to investors.

Meanwhile, analysts at Peel Hunt said the half-year results were ahead of their forecast. "Brand perception is clearly improving as Moss continues to take market share," they added.


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