It's been a highly disappointing 2014 for investors in Super Retail Group Ltd (ASX: SUL) and Breville Group Ltd (ASX: BRG), with the retail peers seeing their share prices fall by 27% and 18% respectively. Indeed, as Breville announced in its recent results, the company is now without a chief executive after well-respected CEO, Jack Lord, stepped down. Furthermore, profit was also down slightly year-on-year as the group shifts its focus to cutting costs in a challenging market.
Meanwhile, Super Retail's recent results saw net profit rise by 6% year-on-year. Could this be the start of a purple patch for the business after a highly challenging period? Or, is Breville still the better buy despite not having a permanent chief executive?
Growth potential
Clearly, both companies have endured difficult periods. However, of greater importance to investors is the future and, on this front, the two companies show strength. For example, Breville is expected to increase its bottom line by 10.8% per annum over the next two years. However, it is pipped by its sector peer on this front, with Super Retail forecast to increase its earnings by 12.3% per annum over the same time period.
Good value?
Of course, the strong growth potential of the two companies helps to justify their currently high P/Es. Indeed, Breville trades on a P/E of 19.1 and Super Retail on a P/E of 17.7; both of which seem high when compared to the ASX's P/E of 16.4. However, while it may at first glance appear as though both companies are overvalued, when their respective growth rates are taken into account, they seem to offer good value for money. For example, Breville's price to earnings growth (PEG) ratio is 1.8, while Super Retail is again more attractive, since its PEG is just 1.4.
Looking ahead
It's a similar story when it comes to income prospects. While Breville's fully franked yield of 3.7% is attractive, Super Retail's fully franked yield of 4.1% is even more so. Therefore, as a result of its higher yield, better growth potential and lower valuation, Super Retail could prove to be the better performer of the two retail stocks. In addition, the uncertainty of not having a chief executive could cause Breville to underperform Super Retail moving forward, as the market reacts negatively to losing a well-respected leader at a tough time for the business.
