Moss Bros has reported a strong first half of the year, clocking up sales of £61.3m while pre-tax profits rocketed 44% to £2.8m. Here analysts give their reaction.
“Brand perception is clearly improving as Moss Bros continues to take market share. Management is now focused on three strategic priorities: to further develop and grow the brand; to achieve full omnichannel capability; and to deliver an outstanding customer experience.
“The strength of trading highlights the success of new ranges and formats. Further improvements in the offer will see all suits become mix and match, a deployment of customer relationship management activity, improvements to the hire ranges, the launch of online hire lines, the launch of a new bespoke offer and a new people director to develop a more skilled and engaged workforce.
“Moss Bros has certainly answered critics’ questions as to whether the recovery ‘has legs’. Strong like-for-like gains, margin improvement, a return to hire growth and the ongoing outperformance of refurbished stores will help to accelerate the process of EBIT margin recovery.” John Stevenson, analyst at Peel Hunt
“E-commerce revenues are low at c10% of sales. International sites are nascent and the British heritage of the Moss Bros brand provides for International roll-out or franchise opportunities. The investment programme and repositioning of the UK business is nearing completion, and we think management will explore these multiple growth opportunities in the medium term.
“Growth in hire could drive upgrades. The hire business commands a gross margin some 30 percentage points greater than retail. Following two years’ of underperformance, there is meaningful upgrade potential if hire can reach the same gross profit contribution as it did at peak in 2013. This suggests around £3m of profit is available if this can be achieved.” Wayne Brown, analyst at Liberum
“The refurbishment programme, which has been accelerated, we believe, is going well. The company plans to refit 27 stores in the current year after refurbishing 55 stores over the last three years. The refurbished stores, we believe, are comfortably achieving their three-year payback hurdle rates.
“Hire, after two disappointing years, is on the ‘road to recovery’. The company has introduced two lounge suits to its ranges and improved service. Online sales, which grew by an impressive 55% in the first half of 2015, now have real momentum. The company has recently combined its retail and hire master files, which will enable it to cross sell between the two divisions, more easily sell accompanying categories and encourage repeat orders.
“The systems upgrades will enable the company to engage with its customer backed up by promotions. In addition, more longer term, the company is well placed to develop the brand overseas over the medium term. Moss has a long heritage with its association to Royal Ascot and stock should benefit from the UK’s global reputation for quality tailoring.” Cantor analyst Freddie George
“Moss Bros’ management is developing a very clear understanding of its target market and shaping its offer to best serve this market. The introduction of its sub brands Moss London, Moss 1851 and Moss Esquire gives it coverage across a range of fits, prices and styles and, with its Savoy Taylors Guild brand, it has a comprehensive coverage of the formal menswear market. This is producing some clear success from the numbers it is producing as well as building up brand equity.
“Current trading continues positively and with an improving economy and jobs market, Moss Bros is in a good position to grow further.” Maureen Hinton, group research director at Conlumino