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January 14, 2013 10:13 pm
Bumper sales of dinner jackets and suits have prompted Moss Bros to upgrade full-year profits.
The clothing retailer said like-for-like sales for the 24 weeks to January 12 rose by 2.7 per cent on the same period last year, while gross profits grew by nearly a 10th.
As a result, the company has upgraded full-year pre-tax profit projections to the end of January to £2.6m, up from £1.75m, buoyed by stronger operating margins as a result of more direct sourcing from factories.
“We have started going direct to the factories so that’s given us a better buying price,” said Brian Brick, chief executive. “In the build-up to Christmas and new year we saw an uplift in functions compared with the year before – more black tie and youngsters dressing up for parties.”
The profit upgrade is another step along Moss Bros’s road to recovery. Last March it paid a dividend for the first time since 2007 after the company made its first full-year profit in four years.
The move came following the disposals of its Cecil Gee menswear business and 15 stores. Other changes included the introduction of a bespoke suit service.
John Stevenson, analyst at Peel Hunt, the company’s broker, forecast a robust 2013 as sales of formal wear hold up amid the downturn.
“More direct sourcing will continue to drive gross margins, while there is opportunity for like-for-like sales growth as existing stores are refitted,” he said. “There is room for a suit specialist such as Moss Bros on the high street and opportunity to take market share away from Marks and Spencer and other suit players.”
Although Mr Brick said consumers’ money would remain tight, unemployment fears would drive suit sales as employees look to smarten up and avoid unwelcome attention. “If the job market is tough people don’t want to stand out as the scruff in the office.”
The shares rose 7 per cent to close at 71p.
● FT Comment
Impressions matter. Not just to image-conscious youngsters who, according to Moss Bros, are increasingly dressing up when they go out, but to investors who stand to benefit from Moss Bros’s ongoing turnround after it paid its first dividend in nearly half a decade last year. While retail makes up about 80 per cent of sales, the company’s hire business has benefited from cash-strapped wedding and prom revellers. It plans to refurbish 25 stores in the next financial year in order to attract a wider group of customers and lure suit shoppers away from high street competitors. But Mr Brick will have to deliver more than an off-the-peg performance if he is to justify Moss Bros shares trading on 41 times estimated 2013 earnings. That looks dear compared with Ted Baker on 21 times.
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