The ‘Black Friday’ and ‘Cyber Monday’ phenomenon has crossed the Atlantic and are now staples on the UK/European shopping calendars. While these marketing-created events have clearly provided a short -term boon for retailers, this sector has been ripe for investors for some time. Below, three of Europe’s top fund managers highlight a longterm high-conviction retail holding. Inditex: Alken’s Nicolas Walewski “We remain bullish on Spanish clothing company Inditex, the biggest fashion group in the world and the owner of brands such as Zara, Bershka and Massimo Dutti.
The retail giant is among the top holdings in our funds. We believe Inditex’s differentiated business model has created a strong and sustainable competitive advantage over many peers in the competitive clothing retail space. The company is highly cash generative and is delivering strong shareholder returns, while growing market share in all of its core markets, including Asia. The growth in online retailing is also creating a tailwind for Inditex’s margins.”
Next: Ardevora’s Jeremy Lang “We are attracted to Next as it has a long, consistent record of generating free cash flow while still driving above average sales growth. This suggests management is careful and patient, investing to allow sustained growth without taking unnecessary risks. In the last two years, the business has kept delivering in a powerful yet unfussy way. Results have consistently been better than expected. This good operational performance has been underpinned by continued capital discipline: excess cash has been used to buy back shares or pay special dividends.”
YOOX/Net-A-Porter: Argonaut’s Barry Norris “The recent merger of luxury online retailers YOOX and Net-A-Porter means the combined company is the global leader in online luxury retail by some way. The company sells other people’s luxury retail, therefore, we believe there is less of a fashion risk. Upon meeting the company recently we were impressed by the new CFO and his view on the potential for synergies in the company. We believe the market continues to underestimate the penetration rate of online luxury and hence the revenue generation capacity of this new group.”