Good morning! I'm sitting here scratching my head, trying to work out what on earth is going on with the markets! Everyone (including myself) seemed to think that US equities had become overheated, and that the sharp sell-off a few weeks ago was a necessary & healthy correction. So what's happened since? The US market has gone straight back up again to record highs!! I don't understand it at all.
Since the market as a whole is strong, but many small caps are very weak (often for no good reason), then that looks to me like a buying opportunity at the moment, selectively (as always).
SuperGroup (LON:SGP)
Share price: 814p
No. shares: 81.0m
Market Cap: £659.3m
Not a small cap, but I'm mentioning it for two reasons. Firstly, I have a particular focus on non-food retailers, as I worked as an FD for 8 years for a ladieswear retail chain, so it's the sector I understand best. Secondly, there is a strong theme at the moment with exceptionally mild weather causing problems for clothing retailers especially.
Mild weather in September is very bad for clothing retailers, as it means that customers hold back on buying relatively high priced winter clothing like coats, jumpers, etc. However, a mild patch (it's still almost like summer here on the south coast, I have the windows open & am wearing shorts!) that lasts all the way through Sept & Oct too, is virtually unprecedented.
So I imagine that the whole sector must be having collective kittens, and worrying about being horribly over-stocked. That's bad for sales, but also margins, as the excess stock will have to be cleared, and the only way to do that is to reduce prices.
The market is anticipating this, and share prices are coming down, especially when the inevitable profit warnings come out. However, this is an opportunity! Weather is often trotted out as an excuse by badly performing retailers, but this is the real deal at the moment - there's no doubt all clothing retailers will be finding things very difficult. It may be too late to salvage a good autumn/winter season this year, but so what? The weather just fluctuates naturally, and it will probably go the other way next year, leading to bumper jumper sales!
I can't resist falling knives, but have learned (the hard way!) that the trick is to buy cheap shares when a…
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Superdry PLC, formerly SuperGroup PLC, designs, produces and sells clothing and accessories under the Superdry brand in approximately 670 points of sale across the world, as well as online. The Company offers a range of products for men and women. The Company operates through three segments: Retail, Wholesale and Central costs. The Retail segment's principal activities consist of the operation of the United Kingdom, Republic of Ireland, European and the United States stores, concessions and all Internet sites. The Retail segment is involved in the sale to individual consumers of its brand and third party clothing, footwear and accessories. The Wholesale segment's principal activities consist of the ownership of brands, wholesale distribution of its brand products (clothing, footwear and accessories) across the world and trade sales. It offers a range of products, including t-shirts, polo shirts, hoods and sweats, joggers, tops, dresses, jackets, shirts, footwear, bags and accessories. more »
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Realm Therapeutics plc, formerly PuriCore plc, is a biopharmaceutical company. The Company is focused on leveraging its immunomodulatory technology to protect and improve the health of adults and children. The Company has initiated drug development programs based on its hypochlorous acid technology. The Company is engaged in the development of small molecule therapies with potential application for the treatment of diseases in a number of therapeutic areas, and an initial focus in dermatology and ophthalmology. The Company has developed proprietary formulations of its technology, with anti-inflammatory and immunomodulatory benefits. Its pipeline of products include PR013 and PR022, which are in Phase I. PR013 is indicated for allergic conjunctivitis and PR022 is indicated for atopic dermatitis. Realm Therapeutics, Inc. is a subsidiary of the Company. more »
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19 Comments on this Article show/hide all
Hi Paul
I see you commented in another place re INL, who issued a positive RNS at 11:24 a.m. yesterday. You referenced a FinnCap note suggesting a NAV of 80p/share (the current SP is 53.25p).
Please would you confirm this 80p number only takes account of existing planning permissions received and is not getting into the realm of assuming a number of additional permissions are received going forward.
Thank you, Martin
Really interesting comments on retailers Paul. I can see that this might be a good opportunity to pick up some high quality stocks at the moments but which ones?
Along these lines I put up an article on Next (LON:NXT) last night which might be of interest: NEXT Results
As you probably know they've reduced their profit guidance for the year due to the warmer weather and I can see that they might need to repeat this trick later on. My concern is that Next (LON:NXT) is still pretty expensive from a historical perspective and hopefully the market will provide a better opportunity to purchase in the next few months.
Cheers,
Damian
Hi Paul. PuriCore (LON:PURI) are presenting at Equity Development in November so perhaps we can grill them then. Their administration costs are way to high and the director remuneration astronomical for the size of the business.
In reply to post #87342
Hi Martin,
Re Inland Homes (LON:INL) - you'd need to get hold of the FinnCap note & have a read of it.
But from what I can tell, the main uplift in NAV that they have assumed, is revaluing the existing (owned) land bank to current market value, but NOT building in any developer's margin. There's further upside from land where INL has options to acquire it, but FinnCap don't seem to have built that into their figures.
I'm not an expert on this sector at all, so am sure there are other readers who can give a more informed view on this company than me.
Regards, Paul.
In reply to post #87344
Thanks Ben, I'll make sure I attend the Nov ED meeting then!
I very much feel that PuriCore (LON:PURI) mgt need to have a rocket put under them. They did a good job disposing of the endoscopy business for a good price, but the remaining business now looks too small & speculative to go it alone.
That said, with the shares now slightly below net cash, and the mkt cap being peanuts, if something positive does happen then there could be exciting upside from here. Although I'm not holding my breath.
P.
In reply to post #87345
OK, thank you Paul.
The approach you describe seems reasonable.
Unfortunately I am very unlikely to get access to the FinnCap note. As a general point, this is an issue where most private investors really are second class citizens. If the note has been paid for by the company I don't really see an issue with it being provided to non-institutional shareholders.
Regards, Martin
ZZZ Snoozebox are moving well at the moment on the back of no news flow. Anyone seen or heard anything?
best
Guy
Re. SGP. At 814p the RSI drops to 16.4. Another indicator that the shares may be way oversold.
In reply to post #87344
Hi Ben, I would very much like to meet PURI management. I just looked at ED website and can only see KBC KWS SYM presenting on 19th November, have I missed something?
kind regards from Neville
Paul,
You mention a full year forecast for profits in region of £60 - 65m. The StockReport suggests £52.7m based on broker forecasts. Quite a big difference.
In reply to post #87353
Hi! At the last ED meeting (shouldn't really call it that!!!) they said that PuriCore (LON:PURI) would be presenting.. Perhaps they are too busy stratagising?! I might email to find out.
Hi Paul, I would be extremely careful of SuperGroup (LON:SGP) - even if it appears cheap-as-chips, if the brand image sucks then it's not worth buying - no matter what the numbers say.
I'm no expert on the brand, but is it possible it's losing its allure and the figures mask more than a seasonal, weather-related bump?
I think there's a strong case that the Super Dry brand may have lost its allure.
Hi Paul,
What concerns me is the high operational gearing of many clothing retailers, which means if they get things wrong it can have a large impact on the EPS. What is the read through for other clothing retail companies that have not yet warned on profits? e.g. French Connection FCCN.
In reply to post #87361
Agreed on SGP
Went into one of their shops this week, there does not seem much evolution in the branding or styling.
Recently sold out I would not re entering at this price, as I would have concerns about the style direction, especially as the target age group are not particular brand loyal. This is good during the rapid growth as they flock to the latest trend, but can be a big issue when fashions change and they leave.
Big brands with loyal "older" clients may not set the world on fire, but generally they are safer.
Re SuperDry - I remember that people said the same thing about their brand last time the company disappointed, in 2011 - that it was tired, and a flash in the pan, etc. That turned out to be complete wrong. If you had bought at the low in spring 2012, you would have had a 5-bagger on your hands inside 2 years.
The trouble is, timing the bottom is so tricky. What I like about it this time around, is that the weather is very obviously the driving factor in the relatively mild profits warning today. So it's nothing to do with the brand, in my opinion. I reckon you'll see lots more profit warnings from clothing retailers over the next couple of months, it's virtually unprecedented to have summer weather continuing into early November! I ate my lunch on the beach today, it was a glorious summer's day, more like June than the last day of October! That will play havoc with sales of autumn/winter clothing ranges, irrespective of the styles or branding.
Regards, Paul.
In reply to post #87368
Thanks Paul,
Thought I would do more research
Google Trends Superdry
(tick forecast box)
Predicting searches for "Superdry" in December this year will be 8% higher than last year. Which does seem to be much better than others in the sector, so maybe there is something in that and it will bounce in the next few weeks.
However this is only for interest in searches - it does not show if they are to convert that interest into sales or at what margins. Just look at the top searches - "Superdry sale" is number 1, "Superdry eBay" is 3 and "Superdry outlet" is 7. All lower margin sale business. So maybe still some concerns
Predicts higher sales probably at lower margins..........
Thanks
In reply to post #87358
Good idea Ben, let me know the outcome on nevilleaustin18@gmail.com, cheers all the best, Neville
I was always amazed at the different attitude retail analysts and insurance analysts took to the weather. There might be floods, which caused huge damage and insurance claims and the analysts would just say "oh well, the insurance companies will raise premiums" - exactly the same weather would lead to retail analysts waffling on endlessly about the impact on valuation.