News Column

Supergroup Investments, Expansion Take Their Toll On Annual Profit

July 10, 2014

Rowena Harris-Doughty

LONDON (Alliance News) - Superdry brand owner Supergroup PLC Thursday reported lower profit in its last financial year, despite strong revenue growth, as investment in both infrastructure and expansion took its toll.

The retailer said the youth sector in the UK retail market remains competitive, but said it's still confident of delivering profitable growth in the year ahead, supported by international growth.

"With a strong pipeline of new stores, particularly in mainland Europe, we are well positioned for further profitable growth in the year ahead. The strength of the Superdry brand and the investment we have made in our business leaves me confident in our ability to implement and deliver the growth strategy," said Chief Executive Julian Dunkerton in a statement Thursday.

The retailer has been pumping money in international expansion, infrastructure projects and its investment plans, a move which has hit profits.

Supergroup posted a pretax profit of GBP45.2 million for the year ended April 26, lower than the GBP51.8 million pretax profit it reported a year earlier, on the back of significantly higher exceptional costs relating to the acquisition and buy-out of partners in Europe, and its new retail distribution centre in Burton-upon-Trent.

Excluding those GBP16.8 million in costs, the company's pretax profit was up on last year.

Revenue for the year rose to GBP430.9 million, driven by a 18% increase in retail sales to GBP285.5 million, boosted by new space, and a 23% rise in wholesale sales to GBP145.4 million.

"Sales increased by 19.6% on the year, a strong result in what remains a very competitive and challenging retail environment and against a backdrop of such significant developments in infrastructure," the company said in its statement.

However, like-for-like sales growth slowed to 3.2% for the year, from 5.7% the prior year, after declining in the third quarter, after Supergroup said it was hit by a promotional UK retail sector, a late Easter, product mix, and lower eBay sales.

"The fourth quarter was affected by a lack of new spring stock in store, heavy competitor discounting, including some Superdry products by wholesale partners, and a late Easter," the company said.

The company saw its shares plummet in May, after it missed sales targets in the final quarter of that financial year, and said it was expecting its pretax profit for the full year to be at the lower end of expectations, hit by the promotional environment in the UK retail sector.

Supergroup said Thursday that international growth opportunities will provide the major sources of expansion for the group, going forward.

"The buy-out of the distributor in Spain and the German agency and franchise business, together with the opening of 59 new franchise stores, and the roll out of two new websites demonstrate the potential for further international growth," it said.

During the year, the company took control of its agency operations in Germany, a move it said at the time will improve wholesale margins in the future, and speed up the pace of its store roll-out programme in Germany. Under the deal, SuperGroup now has the right to the German market and acquired seven stores representing a total of 14,000 square feet. The company also bought-out its Spanish agency.

Since year-end, Supergroup said it took back the rights to trading its Superdry brand in Denmark, Norway and Finland when it bought Scandinavian distributor SMAC Group.

Again, Supergroup said the acquisition of the distribution rights allow it to invest its own capital in the store roll-out, improve margins on the wholesale operation and "retain local operational and management expertise".

Based in Aarhus, Denmark, SMAC has four of its own retail stores, eight franchise stores and a wholesale business.

Online sales were driven by a strong performance in its key European markets, Supergroup said, in particular Germany, the Netherlands and France, following significant developments made to its e-commerce sites.

Supergroup said it will announce its first-quarter results on September 4.

Supergroup shares were up 3.2% at 1,075.00 pence Thursday morning.

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Source: Alliance News

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