SuperGoof | FT Alphaville


It’s arrived — the first in what all probability will be a string of profit warnings from the maker of over-priced Japanese themed T-Shirts sweaters, pumps.

SuperGoof press release:

At the end of August SuperGroup implemented an upgrade programme to its warehouse management systems to increase capacity and efficiency at its Barnwood site to meet future growth in demand. Once live, the business encountered some short-term issues in the transition which has caused a significant, temporary reduction both in the amount of stock and range of sizes reaching its UK stores.

A bungled software upgrade! Not at all what we had expected. We were more worried about the sustainability of the brand. However, with the benefit of hindsight it was inevitable. SuperGoof has grown as such pace that something like this was bound to happen.

What investors now have to ask themselves is if SuperGoof has the systems and management expertise to deliver on its ambitious store roll out programme and overseas expansions plans. It’s all very well having a good idea but you have to execute.

Following today’s announcement investors should be very wary, says Oriel Securities.

This is yet further evidence that Supergroup lacks the management infrastructure to take this brand global and we re-iterate our SELL recommendation.

Indeed. This is SuperGoof’s second stock related issue in a year. In May the company blamed late deliveries of the summer stock for a slowdown in sales. And one might also wonder why this issue was not revealed at the AGM on September 22nd or the trading statement of September 7th.

Anyway, in the wake of this “isolated” event joint house broker Seymour Pierce had reduced its 2012 pre-tax profits target from £66.5m to £60m. It’s also making similar adjustments to its forecasts for 2012.

And that makes us wonder how much of today’s profits warning is down to the warehouse glitch and how much is down to weak demand. Certainly the recent warm weather won’t have helped clothing retailers. But for SuperGoof there are other issues; such as the fact it’s SuperDry label is increasingly popular with 30-40 something dads and fat bloke bankers in the City.

However, Seymour Pierce is remaining positive:

Whilst the news is disappointing, we have always maintained that sales would be volatile and that there would also be a chance of a hiccup along the way. One should take into account, that the company has an exceptional track record, pre-tax profits are still expected to grow by almost 20% and the company still has an outstanding opportunity to develop internet sales and expand the business overseas. On our revised forecasts, the stock is rated at 17.5x FY12 earnings. We continue to believe from a longer term perspective, it is undervalued and are reiterating our Buy recommendation. We are, however, reducing our price target from £20 to £15.

Which is still 100 per cent higher than the SuperGoof share price at pixel time.

An obvious buying opportunity… not.

Update: 2.54pm (London time)

From The Guardina’s Nils Prately:

The most unsettling aspect is that it took until the middle of September, according to finance director Chas Howes, to sniff the problem even though the computer upgrade was implemented at the end of August.

We shall see. Dunkerton says he has “absolute confidence in the company and the brand”. But presumably he would have said the same before the warehouse trouble.

If that’s true then why did SuperGoof not inform the market at the AGM on September 22nd? We need answers. We also need to know why staff were allowed to sell stock through an incentive scheme last week.

Related link:
SuperGroup shares plunge after warning – FT