Interims to July from men's tailoring specialist Moss Bros (MOSB) reveal impressive 4.9% like-for-like sales growth and a 30% surge in taxable profits to £3.7 million, comfortably ahead of the £3.4 million forecast by broker Peel Hunt.

Encouragingly, there's also an upbeat current trading statement from well-regarded CEO Brian Brick, who flags like-for-likes up 3.7% over the 8 weeks to 24 September, Moss not only shrugging off tough comparatives but also the warm start to autumn to secure further market share gains.

Trading in the first half of the year was strong at Moss Bros, a beneficiary of the demise of rival Austin Reed. Continuing the positive recent trend, Moss Bros' retail like-for-like sales including e-commerce grew 7.7%, well ahead of expectations.

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Moss Bros continues to outperform 'a fairly soggy High Street and apparel market', to echo the words of Peel Hunt, a buyer with a 140p price target. 'Given relatively weak footfall across the High Street and tough comparatives, this represents a strong performance, more so given that management decided not to run a mid-season sale,' comments the broker. 'Achieved retail margins increased by an impressive 330 bps, reflecting higher sell through rates and more targeted promotions, plus the boost from no midseason sale.'

'Early customer response to the new Autumn Winter ranges is positive and like for like sales continue to show year-on-year growth,' enthuses Brick. 'More targeted promotional programmes have continued to drive improvements in our gross margin. We are pleased with initial customer responses to our 'Tailor Me' personalisation service, a simplified set of bespoke options offering a custom made suit, ready for collection within 30 days of placing an order, reflecting our ability to innovate and improve our overall customer offer.'

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Over in hire, like-for-like sales growth of 2.8% was modestly lower than expected, although the comparatives were tough and underlying trends positive, boosted by the introduction of lounge suits. While traditional product lines are in decline, Moss is adding further branded product from Ted Baker (TED) and French Connection (FCCN) and more own brand lounge suits including more slim fit and colourful product to appeal to the prom market and younger customers.

Moss Bros - SEP 16Shares remains positive on Moss Bros, which is proposing a 6.1% hike in the interim dividend to 1.91p and forecast to increase the total dividend from 5.6p to 5.8p.

That implies a 5.7% yield on today's 101p share price which looks secure given the retailer ended the half with a bumper £21.1 million cash in the coffers. As Liberum Capital, a buyer with a 115p price target, explains, 'not only is the dividend secure but dividends could rise by 50% per annum and the group would still remain cash positive, if the management wanted to pursue an even more ambitious cash return.'


Issue Date: 28 Sep 2016