SuperGroup battles against difficult economic climate - UPDATE
Ultra-trendy fashion retailer Supergroup (LON:SGP) grew sales over Christmas as its warehousing problems eased and demand for its Superdry-branded hoodies and T-shirts held up.
Total sales increased by 22% to £79m (2011: £65m) in the nine weeks to 1 January, though this was well below the 42% growth seen in the previous three months.
Retail sales rose by 28% and outweighed a dip on the wholesale side, where sales fell 4% to £13 million. Overall, like-for-like sales rose by 5.8% for the period and by 9.3% in December.
Supergroup, which has more than 70 UK stores and over 100 overseas including franchises issued a profit warning in October after problems with a new warehouse system cost it £8.8 million.
Chief executive Julian Dunkerton said: "We are pleased to report a solid Christmas period when set against the difficult economic climate, our own distribution issues in the autumn and our exceptionally strong Christmas sales last year.
"Overall, our retail business has seen an improving sales trend as our stores became better stocked following the resolution of our warehouse issues and the continued demand for our products and brand. We have also successfully opened one floor of our Regent Street store."
Analysts comments were mixed following today's announcement.
Seymour Pierce analyst Freddie George said the key driver's behind his recommendation to 'buy' the stock was firstly, the impact of this new Regent Street store, which he said, had got off to a good start and "should not be under estimated".
Secondly, that international trade still remained the main priority of the group and thirdly, that Supergroup would rightly, in the broker's view, take a more measured approach to expansion in terms of store openings in the UK and development in Europe over the medium term. The broker targets a price of £10 for the stock.
Conversely, Collins Stewart rates the shares a 'sell' targeting a price of 500 pence, and said: "Supergroup remains committed to its opening programme of at least 20 new UK stores and 50 international stores per annum.
"With any high growth business, execution risk is high. However with the UK opening programme accounting for around 40 per cent of growth 2011-2015, and the business is in the process of transforming its target audience, we remain cautious. Whilst this IMS may calm investors concerns that UK has not deteriorated any further, the slowdown in wholesale is unhelpful."
Broker Oriel describes the stock as "one for the brave", adding that on balance it see more catalysts for positive performance than negative, especially since the firm's shares trade at a material discount to the market and the sector- at just 8.5 times PE (price-earnings) for next year.
"A delivery of current forecasts would be enough to see the shares outperform in our view, and whilst we are going to stay on the sidelines with our rating, we wouldn't blame the brave for getting involved." The broker rates the stock a 'hold'.
Shares in the firm were down 0.91 per cent as at 2.10pm, to trade at 546 pence each.
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