The owner of the rapidly expanding Superdry fashion brand is experiencing some growing pains:
Although Thursday’s fourth-quarter trading update is in line with expectations, SuperGroup has experienced a slowdown in its UK high street business. While fourth quarter retail sales were up 39 per cent, they were well down on the third-quarter run rate of 91 per cent.
The retailer is blaming this on phasing of store openings (only one in Q4 this year against 6 last year) and the fact that management did not get its full range of summer stock out quickly enough to benefit from the warm early spring weather.
However, Sanjay Vidyarthi of Espirito Santo Investment Bank reckons SuperGroup had planned to open eight stores in the quarter. To miss seven is significant and suggests, he says, that landlord negotiations are getting tougher:
At this stage, we don’t think the Q4 shortfall will necessarily be caught up in FY12, so this is not just a phasing issue.
(According to Seymour Pierce Superdry had 60 outlets at the end of April, up 18 over the previous year, and is targeting at least 20 openings per annum and up to 120 outlets over the medium term).
As for stock, Vidyarthi isn’t convinced SuperGroup has caught up:
While the summer stock issue could be seen as a ‘blip’ it highlights the learning curve of a young fashion business growing rapidly (contrast with Next, which estimated a 2.5% benefit from the weather etc). We understand that SuperGroup still hasn’t got all of its summer ranges into stores.
As with Ocado, these are the sort slips up you can’t afford when you trade on a sky-high multiple. (After this morning’s decline, SuperGroup still trades on a 2012 PE of around 20).
However, CEO Julian Dunkerton doesn’t seem bothered.
He’s too busy with plans for world domination.
Via Reuters:
SUPERGROUP <SGP.L> CEO SAYS EYEING “SPECTACULAR DEAL” IN CHINA
Update: 14.54 (GMT)
We remove SuperGroup from the Conviction Buy List following the disappointing 4Q11 trading update. We decrease our FY11-13 underlying PBT estimates by 6%/10%/12% reflecting the lower than expected revenue growth and slower store roll-out. Our revised 6-month price target of 1700p (from 2450p) implies c.35% potential upside (post c.20% intraday fall) and we maintain our Buy rating on the stock. Since being added to the Conviction List on November 11, 2010, the shares are up 16.6% vs. FTSE World Europe up 7.2% (over 12 months: SuperGroup +178.6% vs. FTSE World Europe +13.9%) vs. close of May 11.
Shock horror. Superdroop’s biggest fan — Goldman Sachs has removed the company from its ‘Conviction Buy List’.
Related links:
SuperTramp – FT Alphaville
Supertrap – FT Alphaville