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SuperGroup - SuperPerformance

Steve Clayton | 12 May 2016 | A A A
SuperGroup - SuperPerformance

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Superdry plc Ord GBP0.05

Sell: 135.80 | Buy: 136.80 | Change -0.80 (-0.58%)
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Shares in SuperGroup leapt 13% higher after the company revealed that trading in their final quarter had been very positive. In the fifteen weeks to Apr 23, Retail sales rose 30% with like-for-like sales improving by 15%. Wholesale turnover rose by 20% for the second half of the year.

For the full year, total Group revenues rose 21% to £590m, with Retail sales rising 25% to £416m, including like for like growth of 11%. Full year Wholesale revenues rose 14% to £173m. By year end, the group's Retail selling area had risen by 22.5% to 889,000 ft².

The group was up against challenging Q4 comparatives, and SuperGroup attribute the Retail result to good e-commerce sales and new sportswear and premium product ranges launching well. Wholesale revenues benefited from 48 new franchised stores opening. Overall, gross margins are now seen approaching 60bp higher than last year, at the top of guidance.

The Group has generated cash over the year, and ended the period with net funds of £102m (2015: £78m), after paying a maiden dividend in Q4. Profit before tax is expected to be between £72.5m and £74.0m, a result held back somewhat by start-up losses in the USA and China.

Our view

SuperGroup has had a very successful FY2016 and will have delivered double digit profit growth, despite start-up losses in the USA and China.

Fashion is intrinsically risky; the more fashionable a retailer is trying to be, the more risks it has to take that its customers will look at the clothes and shudder. Get it right though, and the frocks fly out of the shops at outrageous price tags.

When SuperGroup listed a few years ago, it quickly ran into growing pains as its infrastructure struggled to keep pace with demand. CEO and co-founder Julian Dunkerton handed over the reins to Euan Sutherland, an experienced international retail leader, in order to concentrate on the branding and design.

Execution now looks to becoming a strength, not a weakness for the group, with the only blot in the copybook being the lengthy turnaround of the US business, but even there, progress looks to be coming through. With strong growth in new space and the successful launch of the new premium price range in collaboration with actor and fashion icon, Idris Elba, SuperGroup looks well set to cope with the stronger comparatives ahead.

The Superdry brand has shown it can travel well and the business is still immature. Growth through new openings, or buying in franchisees should be capable for some time to come. So long as Mr Dunkerton keeps sending the right outfits down the catwalk.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.

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