News Column

Supergroup Says Annual Profit To Be At Lower End Of Expectations

May 8, 2014

Rowena Harris-Doughty

LONDON (Alliance News) - Superdry clothing brand owner Supergroup PLC saw its shares plummet Thursday, after it missed sales targets in the last quarter, and now expects its pretax profit for the full year to be at the lower end of expectations, hit by the promotional environment in the UK retailer sector.

The clothing designer and retailer reported a 12% increases in total group revenues for the fourth quarter ended April 26 to GBP97.8 million, up from GBP87.1 million the prior year, driven by a 13% increase in retail sales to GBP54.6 million, and a 11% rise in wholesale sales to GBP43.2 million.

However, on an underlying and reported basis, like-for-like retail sales declined instead of expectations for growth, down 1.3% on an underlying basis, which excludes the mega-deal promotions on eBay, and down 3.1% on a reported basis. The group said that like-for-like sales were hit by a late Easter, product mix, and lower eBay sales.

Supergroup said that after a challenging retail trading environment during the quarter, its pretax profit for the full-year will be at the lower end of the consensus range of GBP61.1 million to GBP65.2 million.

"Our sense is that, in a promotional retail environment, SuperGroup has sacrificed some sales, while preserving gross margin," Liberum Capital analyst Sanjay Vidyarthi said in a research note Thursday.

Analysts at Liberum Capital had been forecasting a 20% increase in retail sales for the fourth quarter, and a 5% increase in underlying like-for-like sales, excluding eBay sales.

Supergroup said that for the full financial year ended April 26, total retail sales grew almost 18% to GBP285.4 million, although like-for-like growth slowed to 3.2%, from 3.7% the prior year. Wholesale sales for the year increased 24% to GBP145.6 million, although it said that wholesale sales in the final quarter were knocked back by the earlier phasing of sales falling into the third quarter.

"More importantly, we think that a continuing promotional environment at the younger end of the market may have hit SuperGroup which does not discount in its full price stores. SuperGroup appears to have sacrificed sales but preserved gross margin. Whether this strategy needs to change is up for debate," said Liberum's Vidyarthi.

The group has been investing significantly in infrastructure projects, including the relocation of its retail warehousing operation, although it said it has now passed the peak of its infrastructure investment and is well placed for the year ahead.

"The group has now entered its second phase of planned investment which includes payroll, human resources, finance and a point of sale system," the company said in a statement.

During the year, the group opened 100,000 square feet of new space, up 18% on the previous year. It said that within its wholesale division, it continued to extend the reach of the Superdry brand, having opened further franchised stores in France, India, Czech Republic, Italy and Indonesia.

"The reaction to our autumn/winter 2014/15 collections is encouraging and, with a strong pipeline of new stores, particularly in mainland Europe, positions us well for the year ahead," said Chief Executive Officer Julian Dunkerton in a statement.

"We maintain our view that SuperGroup is in a better place now and is making the necessary investment in infrastructure," Vidyarthi added.

Supergroup shares were down 11% at 1,205.46 pence Thursday morning, putting it at the bottom of the FTSE 250.

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Source: Alliance News

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