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More dross from Moss Bros

The suit retailer endured a trading slump at the end of its 2018 financial year, but it's not out of the woods yet
March 27, 2018

For investors, the question over Moss Bros (MOSB) is where do industry challenges end and in-house problems begin? The group – which has warned over profits twice since the start of the year – has seen like-for-like retail sales decline significantly over the first eight weeks of the new financial year. Supplier issues and stock shortages have taken a toll, although even the most sympathetic industry analysts would deem these factors wholly avoidable. The retailer expects to resolve the stock shortages by late spring, but results for the January 2019 year-end will be “materially lower” than expected.

IC TIP: Hold at 46.5p

Group like-for-like sales rose 1.6 per cent in the period under review, as a 2.9 per cent rise in retail offset a 6.2 per cent slump in the underperforming hire division. One suspects that the fall-away in trading activity took management by surprise, particularly as a relatively encouraging first-half performance continued well into the third quarter of the year. The subsequent supply issue was summarised by chief executive Brian Brick: “We suffered from a significant stock shortage, due to the poor implementation of the project to consolidate suppliers. We left ourselves with too little 'running line' stock to close out the year having bought cautiously for the second half of 2017. This has continued to hamper our performance into the start of the year.”

Lease terms are a growing issue for the retail industry, so investors can take some comfort in the knowledge that the group has a relatively low average lease length of 55 months and is “targeting significantly improved lease terms on renewal”. The overall estate now stands at 128 outlets, broadly static on the 2017 year-end, with new openings in Dundrum, Gateshead Metrocentre, Rushden Lakes, Lincoln and Bexleyheath, while a further three stores were relocated in Bicester, Cardiff and Bracknell.

MOSS BROS (MOSB)   
ORD PRICE:47pMARKET VALUE:£47m
TOUCH:45-47p12-MONTH HIGH:120pLOW: 39p
DIVIDEND YIELD:8.6%PE RATIO:9
NET ASSET VALUE:34pNET CASH:£17.5m
Year to 27 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141094.43.85.00
20151154.83.65.30
20161215.84.75.55
20171287.15.55.89
20181326.75.34.00
% change+3-6-3-32
Ex-div:10 May   
Payment:22 Jun