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Noni B share price jumps 16% on strong Christmas trading update and 140% sales growth

In morning trade the Noni B Limited (ASX: NBL) share price has been amongst the best performers on the market.

At the time of writing the retailer’s shares are up 16% to $2.91.

Why is the Noni B share price storming higher today?

Following a bitterly disappointing trading update from Kathmandu Holdings Ltd (ASX: KMD) last week and research by Citi this week, there have been concerns that retailers experienced their worst Christmas in years in 2018.

This has led to a number of retail shares such as JB Hi-Fi Limited (ASX: JBH), Kathmandu, Lovisa Holdings Ltd (ASX: LOV), and Super Retail Group Ltd (ASX: SUL) thoroughly underperforming the market over the last 30 days.

Noni B’s shares have not been immune to this either. Prior to today they were down 9% over the last month, compared to a 4% gain by the ASX 200.

The retailer appears to have attempted to address these concerns this morning by releasing a trading update.

What was in the update?

According to the release, for the six months ended December 31, total sales grew by 140% to approximately $457 million.

This was driven by the acquisition of numerous brands from City Chic Collective Ltd (ASX: CCX) (formerly known as Specialty Fashion) and strong trading during the Christmas period.

Trading was so positive for Noni B that it posted a 1% increase in like for like sales during the Christmas period, which was a vast improvement on previous trading. At the end of October like for like sales were down 5% year to date.

As a result, this meant the company ended the half with a like for like sales decline of 3.1%.

Management also advised that due to improved trading, combined with achieving integration efficiencies from the acquisition ahead of schedule, it expects underlying EBITDA for the first half to be approximately $29 million. This puts it at the upper end of market consensus range of $25 million to $30 million.

Should you invest?

I think this result once again demonstrates the quality of the Noni B business and management’s ability to turn around struggling brands and make them highly profitable.

With its shares changing hands at under 12x earnings, I think Noni B would be a great option for investors looking at gaining exposure to the retail sector.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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