Tuesday 10 December 2013

Analysis of Gerry Weber

A German fashion retail chain

Company: Gerry Weber AG

Business: A German fashion retail and accessories company with three brands for women: Gerry Weber, Taifun and Samoon. Underneath the Gerry Weber brand they have an additional two brands (Gerry Weber Edition and G.W.). They run their own stores but also franchise as well as online and sale of their brands in department stores.

Active: With their own stores (around 850) they are mainly present in Europe with strong focus in Germany, Austria and Switzerland. Lately they have starting to expand into the countries around them so Poland, the Netherlands, Denmark, Sweden (opening first store in Malmö soon and then in Stockholm). In total their brands are being sold in over 2600 stores world wide and have distribution channels in 62 countries.

P/E: 17.6

Comment: When I made this analysis there were serious problems with their homepage. I hope that it is sorted out by now so that you can check it out without problems. I liked that they kind of direct themselves to the older generation and not the young like most other companies. When I walked past one store they had a catwalk for retired people with a bit elder, not thin models showing what was new in the collection. Sometimes the world seems to forget that the old generation are sitting on big bucks... but Doro knows for instance this...

contrarian values of P/E, P/B, ROE as well as dividend

If you are interest in retail companies then you should also take a look at the analysis that were made with H&M, Inditex as well as Abercrombie.

The P/E for Gerry Weber must be considered high with 17.6 and also the P/B is high with 3.8 but in both cases better than H&M and Inditex. Still this means that Graham would find it of little interest to invest in. The earnings to sales is up at 10% which I find good since it is better than Abercrombie but worse than H&M and Inditex. The ROE is also excellent with almost 22% (in the old analysis I was not looking at this figure but H&M is at 38%, Inditex at 28% and Abercrombie as low as 13%) and the book to debt is at a ratio of 3 which is great! In the last five years they have had a yearly growth of 7.1% which is excellent and similar to both Inditex and H&M. This gives us a motivated P/E of around 19 to 23 which means that Gerry Weber is today slightly undervalued on the market. They pay a dividend of 2.5% which represents almost 44% of their earnings so it is fully acceptable.

Conclusion: With their own stores they have plenty of space to keep expanding and especially if we compare them with Inditex with their over 6,000 stores. We can also see that their sales are much lower compared to the giants Inditex and H&M (but their earnings to sales are not so bad). Graham says no to it and I am a little indecisive especially when I compare it to a couple of its competitors. I would understand if one would be interest in investing in Gerry Weber today but... personally I will not do it.

If this analysis is outdated then you can request a new one.

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