In the past, the world used to be a series of wars and pestilence interspersed by episodes of peace.
But what then is the future? Well, walk down a city main street in mid-summer, and you will see girls in beautiful tops and short skirts, and men in bright t-shirts and skinny jeans. People are happy, laughing, flirting and chatting.
One huge art project
You see, the future is not drones and robots. We are unlikely to ever have flying cars, jet packs or time-travelling androids. The future really is sexiness, fun, fashion, bright colours, and happiness. The world is now one huge art project.
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SuperGroup (LSE: SGP) is also a company which seems to me to be one big art project. Just about every young man in the country owns a Superdry t-shirt. I love their new range of clothes, and they seem to have improved the cut and finish of their garments. This is now a designer label which is expanding across the world, including investing £9 million to tap the booming fashion sector in China.
Not surprisingly, a company which is growing as fast as this commands a fairly lofty valuation. But, to me, a P/E ratio of 18.72 seems about right. SuperGroup does not yet pay a dividend, but one is pencilled in for 2016.
This is a brand which still doesn’t yet have the allure of a Burberry (LSE: BRBY) or a Ralph Lauren, but I see this as one of fashion’s future stars, and definitely a company worth buying into.
Elephants don’t gallop
There is no doubt that Burberry has a stronger brand than SuperGroup, and it is a far bigger company, with a market cap of £7.16 billion as opposed to £1.17 billion. It has seen phenomenal growth in sales over the past decade as sales in emerging markets have soared. It’s trademark beige tartan scarves and jumpers have sold like hot cakes around the world.
However, what concerns me is that this greater size makes it more difficult for the business to grow. I just wonder whether this company has now reached the limits of its growth. My hunch is that earnings are likely to level off, and the share price is as likely to fall as rise. A P/E ratio of 21.04, for such a large company, leaves little margin for error.
That’s why I would pick SuperGroup over Burberry. To me it is the fresher, younger brand with the greater potential for growth. A stronger management team, combined with ever improving design, a huge variety of products, and an ambition to sell its wares across the globe, means it is now of the UK’s leading fashion companies.
