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Saturday 26 July 2014

Superdry group profits up to £14.7m after series of setbacks

James Davey

Published 12/12/2012|12:14

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Pippa Middleton and singer Ed Sheeran are said to be fans of the brand. Photo: Getty Images

SUPERGROUP has denied its Superdry fashion brand was losing its cachet in the trend-conscious youth market, pointing to strong profit growth as evidence of a continued recovery from a series of setbacks.

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The British brand, best known for logo-decorated T-shirts and whose celebrity fans include royal favourite Pippa Middleton and singer Ed Sheeran, has seen its shares more than double over the past six months on the back of three reassuring statements.



But the stock remains well down on its high of 1,899 pence set in early 2011, after three profit warnings and a litany of management mistakes, including stock availability issues and the botched implementation of a warehouse IT system.



"The most important thing is does your product progress? Have you got diversity of product to capture different parts of the population?," co-founder and chief executive Julian Dunkerton said.



"If you go into any shopping mall and look how busy we are compared to other people ... I think you will realise that we are on track," he said.



The company said sales at British stores open for more than a year rose 3.9 percent in the 26 weeks to October 8 and remained positive in the first six weeks of its second half.



"To have like-for-like growth I think really puts paid to any kind of brand argument. There will always be sniping, but look at the popularity of the product and look at our growth," said Dunkerton.



With Britain facing the prospect of a triple-dip recession, many retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes.



SuperGroup has not been immune to the downturn but made an underlying pretax profit of £14.7 million in the first half - in line with analysts' expectations and up from £13 million in the same period last year.



That outcome should help rebuild some management credibility after a string of profit warnings in the previous year.



However, despite Dunkerton's assertion that SuperGroup was in good shape for the Christmas trading period and confidence in delivering full-year profit targets, some analysts still have concerns and the firm's shares fell 7 percent today.



"Our view remains that consensus expectations of circa £50 million profit before tax for FY13 (2012/13) are too high as the cost of growth becomes apparent," said Espirito Santo Investment Bank analyst Sanjay Vidyarthi, who is forecasting £40 million and rates the shares a "sell".



The stock was down 38.5 pence at 557 pence at 1021 GMT, valuing the business at about £444 million.



SuperGroup, which trades from 375 stores and concessions globally, said first-half total sales of its trademark T-shirts, hooded tops, check shirts and jogging bottoms rose 16.2 percent to £158.2 million, as it started to benefit from strengthened product ranges and operational improvements.



Gross margin rose 90 basis points, reflecting falling cotton prices and improved supplier terms.

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