Teddy trouble

Some 200 staff have signed an online petition complaining of a culture of forced hugs at the global lifestyle brand, with founder and CEO Ray Kelvin now subject to an internal investigation.  This is the danger with investing in companies driven by a single, strong individual, you are exposed if something happens to them.

The scandal has wreaked havoc on Ted Baker’s share price which is down 20% over the last week, and 45% over the year. This overshadows today’s trading update for the 16 weeks to 1 December 2018, which hailed a “resilient performance despite challenging external trading conditions”. 

Online growth

The £657m FTSE 250 company posted a 0.2% decrease in group revenue (0.4% in constant currency) year-on-year, which reflected the anticipated decline in wholesale sales due to delivery timings, largely offset by a positive retail sales performance. Trade in the UK, Europe and the East Coast of America was affected by unseasonal weather, while the wider UK retail slowdown also hurt.

It is fighting the high street decline with an 18% rise in e-commerce sales, which now represent 30.3% of total retail sales, up from 26.3% last year. Both retail and wholesale gross margins were in line with expectations.

Suits you

The group opened licensed stores in India, Kosovo, Saudi Arabia, Singapore and South Korea and Kelvin himself emerged to praise “the strength of the Ted Baker brand and the design and quality of our collections”. It now trades at 13.6 times earnings and yields a progressive 4.4% with cover of two, and although earnings are forecast to drop 1% in 2018, City analysts are pencilling in 4% and 9% growth over the next two years.

The scandal overshadows everything but it is worth noting that investors were already selling before it broke. Kelvin stays on for now, but if he goes conditions will look even more challenging. Some might see this as a buying opportunity, though.

Crowned Joules

Joules Group (LSE: JOUL) is another premium lifestyle brand and multi-channel retailer whose share price has lost its shine. It grew strongly after listing on AIM in May 2016 but is now down 33% in six months and our old friend ‘challenging conditions’ are partly to blame.

The stock fell despite positive full-year results in July, which showed a 28.5% rise in underlying pre-tax profit to £13m, with revenues up 18.4% and its international operation expanding strongly. This week’s update was also pleasing, with first-half profits ahead of initial expectations and its e-commerce operation doing “particularly well”, accounting for almost 50% of sales.

Brexit casts a shadow, but the City still reckons Joules can increase earnings by 15% in the year to 31 May 2019, and 19% the year after. With the stock now trading at 17.3 times earnings, and global and online growth prospects still looking healthy, it looks a tempting buy. The yield is just 1.2% but management is progressive, and with cover of 4.8 it can afford to be.

The post Forget 0.5% from a cash account. I think these 2 retail growth heroes could suit you much better appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Joules Group and Ted Baker. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The firm’s share price had plunged almost 50% since the summer but came roaring back this morning. The headline on the report trumpets the news, “Strength of the Joules brand and flexible ‘total retail’ model deliver first-half profits ahead of initial expectations.” That’s what we want to hear – that’s ALWAYS what we want to hear – ‘ahead of expectations’ almost always means the share price is going up.

Strong e-commerce sales

The premium British lifestyle brand owner is talking about trading during the 26-week period to 25 November, which is the first half of the group’s 2019 financial year. Other retailers have been struggling, but not Joules. Revenue shot up almost 18% year-on-year, which the directors put down to “the strength of the Joules brand, the appeal of our products, the flexibility of the Group’s ‘total retail’ model in the UK and the rapid growth of our international business.” Indeed, sales abroad came in at 16% of the total, up from just over 11% a year ago, suggesting that the international opportunity could be substantial if overseas sales continue to gain traction. 

The e-commerce operation performed “particularly well” and now accounts for almost 50% of sales. I think that a strong internet presence is essential for any retailer if it is to survive and thrive these days, so I find the figure pleasing. The company said its integrated cross-channel model is “well suited to meet changing consumer shopping behaviours.” I reckon one manifestation of that is the way it is possible to stumble across a Joules outlet in perhaps unexpected places, such as concessions in larger stores and in out-of-the-way seaside towns around a quiet corner next to buckets and spades dangling from a window frame. It seems to me that Joules is determined to place itself directly at the point of maximum relaxation and wallet-opening!

Robust operational momentum

Looking forward, the directors are expecting difficult trading conditions to continue in the retail sector. They’ve got their hard-Brexit contingency plan in place, but overall think the strength of the brand, loyal customers and a “rapidly expanding” international business will carry Joules through to further growth. Overall,  profit before tax for the full year should be in line with their expectations, so all is well in the colourful world of Joules.

So maybe it’s time to return to the shares. Today’s share price near 228p puts the firm on a forward-earnings multiple of 17 or so for the trading year to May 2019 and the forward dividend yield is just over 1.2%. That strikes me as a fair valuation considering that City analysts following the firm expect earnings to grow around 15% this year and 19% next year. Joules is a great British success story and I’m tempted by the shares right now.

The post Should I grab some of these vibrant retailer shares, up 10%-plus today? appeared first on The Twelfth Magpie.

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• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Joules Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s the Wizz!

Wizz posted profits of €50m in the three months to 30 June but this was €8.1m lower than a year ago, which reflected higher than expected disruption costs and the busy Easter period falling outside the quarter this year.

Total unit revenue dropped 1.4% to 3.67 euro cents per available seat kilometre (ASK), while total unit costs fell 2.2% to 3.3 euro cents per ASK. Wizz also suffered an “unprecedented number of disruptions” due to you-know-what, which increased the number of cancellations from 34 to 145 and cost it €9.1m in passenger delay and compensation costs, up 203%.

Climbing again

On the plus side, total revenue increased 17.9% to €553.4m, while ticket revenues increased 24.5% to €330.4m. Ancillary revenues grew 9.3% to €223m. CEO József Váradi hailed the group’s “double-digit growth in passenger numbers and revenues” and “ever higher load factors”. However, he warned that air traffic control disruptions are likely to continue into the autumn, and combined with fuel prices rising, the group is trimming its full-year growth target from 20% to 18%.

Investors should not feel too aggrieved, the stock is up more than 40% over the last year, and 112% over three years. Any dip could be an entry point, if you are fast, as it is already climbing again. Wizz trades at a forecast valuation of 16.4 times earnings although this year could be bumpy, with City analysts predicting a 37% drop in earnings, but this should rebound 21% in the year to 31 March 2020.

The £3.47bn budget carrier boasts free cash of €1,116.6m and my Foolish colleague Paul Summers notes that its capital and operating margins are markedly higher than its rivals. Wizz is still a flyer.

Crown Joules

Better news for investors in premium lifestyle fashion chain Joules Group (LSE: JOUL), which is up a slinky 2.31% after posting an 18.4% rise in group revenue to £185.9m and an even sharper 28.5% increase in underlying profit before tax to £13m.

Today’s annual results to 27 May also showed underlying basic earnings per share (EPS) jumped 28.5% to 11.8p, with statutory basic EPS up by 36% to 9.9p. Gross margins increased 25 basis points to 55.7%.

Joules continues to win converts to its branded lifestyle clothing, accessories and homewares, with active customers up 23.4% to 1.15m. It is successfully promoting its ‘authentic’ British wares in the US, Germany, France and other European markets, with international revenue up 35.7% to 13.1% of group revenue. 

Pint of Porter

CEO Colin Porter hailed another strong year of growth due to to the strength and appeal of the Joules brand, and its loyal customer base. He said momentum will continue into full-year 2019, and proposed a final dividend of 1.3p per share. The forecast dividend is 0.9%, covered 4.4 times.

Joules has risen 102% in two years and could still double your money, even if it is valued 26.8 times earnings, as its robust double-digit earnings growth forecasts make this a stylish portfolio accessory. 

The post Have £2,000 to invest? Here are 2 monster growth stocks to consider appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Joules Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Rising expectations 

Shares in this challenger law firm have ripped higher since the IPO in October. At the time of writing the shares are trading at 255p, up around 30% from the IPO price of 190p. And it looks as if these gains are set to continue as today the company reported that for the financial year to January 31, results are expected to be “comfortably ahead” of market expectations. 

In the weeks after hitting the market, the company’s profile has only improved, and this has translated into higher sales and profits. Management believes Keystone is uniquely positioned in the UK law market to consolidate its position and use technology to push ahead of its competitors. Today’s trading update makes several references to the group’s “distinctive platform model” and “infrastructure and recruitment capabilities,” which continue to attract both new clients and employees.

Using tech to boost growth 

Keystone bills itself as more of a tech company with lawyers than a pureplay law firm. It seems as if the business is doing something right as its client list is full of blue-chip names such as RBS, RSA and Siemens.

City analysts are highly excited about the prospects for the group. Earnings per share are expected to rise 124% to 6.4p for fiscal 2018, although considering today’s news, it looks as if these forecasts are now too low. Analysts have been expecting it to go on to earn 9.6p for fiscal 2019, but once again, considering today’s news, it would appear as if this is a conservative estimate. 

With profits set to roughly double every year for the next two years, shares in Keystone currently look cheap as they’re currently trading at a PEG ratio of 0.8. Considering this,  it’s easy to see how the shares could double over the next 12 months — something I wouldn’t rule out as City analysts revise their estimates for growth higher. 

International expansion 

Another small-cap that I believe could double in value during 2018 is clothing and design business Joules Group (LSE: JOUL). 

Joules has already achieved an impressive return of 13% for investors so far this year.  City analysts are expecting it to report 56% growth in earnings per share for the current fiscal year and 18% for 2019. However, I believe that these figures could be conservative as the company recently announced that its critical Christmas trading period performed ahead of expectations and following this, management now expects full-year profit to be ahead of the City’s estimates. 

The most important part of the group, and where I believe most of the growth will come from over the next few years, is its international division. International sales expanded by 26.4% for the 26 weeks to the end of November and now account for 11.3% of group revenue. 

As Joules continues to grow overseas, its bottom line should benefit significantly and this could drive further outperformance. In other words, even though the shares look expensive trading at a forward P/E of 24, I believe that this fast-growing retailer deserves your attention as it continues to attract customers and register healthy earnings growth.

The post 2 stunning small-cap growth stocks that could double in 2018 appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.