Investment: Moss Bros has tough job ahead

Investment Column
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The Independent Online
THE MARKET doesn't like smaller retailers at the moment and even a well- managed company such as Moss Bros has been no exception.

Shares in the menswear retailer, whose portfolio takes in Cecil Gee, the Suit Company and Savoy Taylor's Guild and Blazer, fell 21p to 122.5 yesterday, their lowest for three years. The reason was a slight under-performance in first-half profits, which came in at pounds 5.7m compared with pounds 5.8m last year, and news of a dip in margins as price cutting by rivals forced Moss Bros to follow suit. Like for like sales have flattened by up to 2.3 per cent in the first half and 2 per cent in current trading. But margins fell by a full percentage point as Moss Bros reduced prices to avoid losing market share to rivals who were slashing prices to shift unsold stock. If there is a silver lining to the cloud hovering over the retail sector it's that Moss Bros' keen prices are well suited to tougher times. It has been snapping up new sites as high street rents fell sharply after their peak a few months ago. Moss Bros o pened four stores in the first half and has nine more planned for the second. Moss Bros' market share in suits has grown by a full percentage point. Assuming full-year profits of pounds 18.5m, Moss Bros shares trade on a forward multiple of just nine. That is cheap for a good company. But with the menswear market looking set for a price battle it is difficult to see the shares making much headway.