Interactive Investor

What's just turbocharged SuperGroup?

12th May 2016 17:24

Harriet Mann from interactive investor

Emerging even stronger in the final quarter and with its maiden dividend in the bag, fashion retailer SuperGroup reckons profit surged 15% last year. New products and online growth drove sales of its Superdry-branded clothes a fifth higher in what is typically the quitest period. Even though co-founder and brand director James Holder is on the way out, investors have stocked up on the shares Thursday.

Clearly, founder and former chief executive Julian Dunkerton's decision to step down in 2014 to focus on product design paid off - the share price is up about 50% under new chief Euan Sutherland. So did a collection by actor Idris Elba. Hopefully, a decision by Holder to step down from the board to run a "design hot house" for SuperGroup will too.

Sales jumped 21% to £589 million in the year to 23 April, with a stellar performance from retail - equal growth contributions from new and existing space increased retail revenue by a quarter.

Following 24 new store openings across Europe last year, SuperGroup has plenty more in the pipeline. Its wholesale business benefited from popular in-season sales and new stores, with a strong second half returning the business to growth.

Keeping a close eye on its costs should deliver a 40-60 basis point rise in gross margin from 60.9% when the company reports full-year results on Thursday 14 July, with underlying pre-tax profit now expected to jump by at least 15% to £72.5-£74 million. Consensus estimate back in January was for £72.2 million. Last year the group made £63.2 million.

The numbers are still being held back by losses in North America and China, although things are going as planned. This 1% profit upgrade surprises Numis, although they reckon rising online costs and the length of its final quarter have been a drag.

Clearly the market thinks the sell off since January, during which SuperGroup lost over a quarter of its value, was overdone. Up as much as 13% Thursday, SuperGroup shares smashed through downtrend resistance at around 1,364p and briefly broke above its 200-day moving average.

Shareholders will hope that bearish resistance turns into technical support. Numis analyst Andrew Wade thinks they're worth 1,400p.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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