Burberry (LSE: BRBY) released its first-quarter trading update today. Comparable growth sales slowed to 6%, slightly missing analysts’ expectation of 7%. For the same period last year, comparable sales grew 12%; and for the 2014/5 financial year, comparable sales grew 9%. Sales on a like-for-like basis declined in the low-single digits in Asia Pacific, as trading conditions remain difficult in Hong Kong, whilst comparable sales in Mainland China grew by a low single-digit percentage.
Elsewhere, it’s a rosier picture. Comparable sales continued to grow steadily in Europe, the Middle East and the Americas, with high single-digit to double-digit growth rates. Burberry is targeting further growth from the Japanese market, where it had opened five new stores in the past quarter.
The expiry of the licensing agreement with Sanyo Shokai to use the Burberry brand in Japan in June 2015 will allow Burberry to expand its presence there directly through opening new stores. As Burberry gains access to the high margin retail operations and has greater control over the brand’s image; the end of the licensing agreement should be very positive for the brand in the long term.
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Burberry’s reliance on the higher-margin Asia Pacific market means it has been particularly hard hit by China’s anti-graft campaign. Although worse may still be yet to come, longer-term fundamentals for the luxury market in Asia remain broadly intact. Its valuation has also come down significantly, with its shares valued at 19.9 times 2015 expected earnings.
Shares in Burberry fell 2.2% to 1,582p in morning trading.
Halfords
Halfords’ (LSE: HFD) like-for-like revenue growth of 3.5% for its first quarter disappointed investors. Prior to the announcement, analysts had expected like-for-like revenue growth would have exceeded 4%. Like-for-like retail sales growth slowed from the 7.9% figure achieved last year, as weak car cleaning sales dragged sales 0.3% lower in Halford’s Car Enhancement division.
Shares in Halfords fell 1.6% to 541 pence today; but they are still 15% higher than since the start of 2015. Valuations remain fair, as full year sales and earnings expectations remain unchanged. Even with slower earnings growth, analysts expect underlying full year EPS will grow by 3% to 35.1 pence. This gives Halfords a forward P/E of 15.4.
Moneysupermarket.com
Moneysupermarket (LSE: MONY) also released its trading update today. Revenue growth for the three months leading to 30 June slowed to 10%, from 25% in the previous quarter. Home Services, which includes price comparison for energy utilities and telephone, saw growth moderate to 31%, from 141% in the previous quarter. But, this was not unexpected.
Money services, which includes price comparison services for credit cards and current accounts, continues to grow fairly rapidly, with revenues growing 16% on the same quarter last year. Insurance revenues grew 10% in the quarter, as it noticed a pickup in motor insurance premiums.
Although Moneysupermarket’s forward P/E is 21.6, the company’s long term growth prospects are intact. Revenue growth is likely to remain relatively high, as consumers have become increasingly price conscious and more willing to switch services. But this is offset by increasing competition in the sector, including from Google‘s own price comparison service. As its forward P/E is in excess of its historical average of less than 20, it may be wise to wait for a pull back.
