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Moss Bros smartens up its stores and margins

The company looks suited and booted as its store refurbishment programme nears completion and its various sub-ranges negate the need for regular discounting
September 28, 2016

The belt-and-braces overhaul at clothier Moss Bros (MOSB) has led to a 30 per cent surge in operating profit, suggesting its new-look stores and revamped ranges are proving popular. Gross margins in its retail division, which accounts for 85 per cent of total revenue, rose 3.3 percentage points as the different price points of its new sub-ranges removed the need to have a mid-season sale. Investments in its e-commerce operations, alongside the appointment of a customer director and new chief financial officer, mean better data collection from online sales which have been used for more targeted marketing.

IC TIP: Buy at 103p

Chief executive Brian Brick says its store refurbishment programme, which means "gutting the store and putting in a new infrastructure", was nearing completion. There are nine to be completed this year, 20 in the next financial year and a handful the year after. "The old perception of Moss Bros is different to the reality now," says Mr Brick. Roughly a quarter of its products are sourced in dollars but the company is hedged through to spring 2017, and management says buying prices have been improved by using fewer suppliers.

Analysts at Liberum expect pre-tax profit of £6.4m for the year to January 2017, leading to EPS of 4.8p compared with £5.6m and 4.2p in FY2016.

MOSS BROS (MOSB)
ORD PRICE:103pMARKET VALUE:£104m
TOUCH:102-105p12-MONTH HIGH:110pLOW: 89p
DIVIDEND YIELD:5.5%PE RATIO:19
NET ASSET VALUE:37pNET CASH:£21.1m

Half-year to 30 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201561.32.82.21.80
201663.83.73.01.91
% change+4+30+37+6

Ex-div: 27 Oct

Payment: 25 Nov