Shares in online fashion retailer Boohoo.com (LSE: BOO) are up by over 3% today after it released a very encouraging set of interim results. Sales increased by 35% versus the same period last year, while gross profit was up 30%.
That’s despite a narrowing in gross margins of 220 basis points, which was due to adverse exchange rate movements as well as an investment in pricing. The latter drove revenue higher and, looking ahead, Boohoo.com expects sales growth for the full-year to be between 30% and 35%, which would represent a significant step forward for the business.
As ever, Boohoo.com has a strong balance sheet with a net cash balance of £60m. Its warehouse expansion is now completed and, with new apps and websites which are mobile-friendly, it appears to have the logistics in place to provide improved sales growth. And, with its shares trading on a price to earnings growth (PEG) ratio of just 1, now could be a good time to buy a slice of the business for the long term.
Similarly, M&S (LSE: MKS) is also focused on improving its logistics. In recent years it has rejuvenated its supply chain and concentrated on becoming a leaner and more efficient business. Additionally, website improvements are likely to have a positive impact on future sales, which means that M&S is expected to increase its bottom line by 9% in the next financial year.
This puts it on a PEG ratio of just 1.4, which for a company as stable as M&S and with a loyal customer base, appears to be a very appealing valuation. Furthermore, M&S has a forward yield of 4.2%, thereby making it a desirable income stock, too.
In terms of consistency, though, Sports Direct (LSE: SPD) is a difficult stock to beat. It has posted double-digit increases in earnings in each of the last five years and is expected to do the same in the next two years. This puts it on a PEG ratio of only 1.1 which, for such a reliable performer, seems to be very enticing.
Furthermore, Sports Direct has scope to expand abroad, with the company focusing resources on European expansion. This appears to be a sound move, since it not only offers growth opportunities, but also diversifies the business and makes it less dependent upon the UK economic outlook. And, while share price growth of 442% in the last five years may not quite be repeated in the coming years, Sports Direct remains a top notch long term buy.
The same could be said of Sainsbury’s (LSE: SBRY). It may be enduring a highly challenging period at the present time, with mid-tier operators being outmuscled by no-frills discount operators, but Sainsbury’s seems to be reacting well to an improving outlook for UK consumers. For example, it has changed its pricing strategy to improve margins and, with UK consumers having increasing disposable incomes in real terms, a focus on choice and quality could well prove successful.
Meanwhile, Sainsbury’s continues to offer excellent value for money. It has a price to earnings (P/E) ratio of only 11.1 and, while its earnings are likely to come under pressure in the short run, in the longer term an improving UK economy is likely to ease the challenges it faces and force an upward rerating in its valuation.