Proof that the retail sector is not completely dead, youth fashion brand SuperGroup (SGP) jumped 12% to 710p after reporting double-digit sales growth since November. Suggestions that the Cheltenham-based fashion retailer's popularity has peaked now look unfounded, particularly as there's a new leg to international expansion.
In one of the hard-pressed retail sector's most bullish Christmas updates, the £508 million cap pleased punters by guiding up full-year gross margins from 'broadly flat' to an increase of between 50 and 75 basis points in its third-quarter (Q3) update. This reflected improved 'intake' margins as well as an absence in the three-month period of clearing out old stock which crimped first-half margins.
SuperGroup reported 12.3% growth in group sales to £115.1 million for the 13 weeks to 27 January. A good Christmas drove like-for-like sales up by a better-than-expected 10.6%, with chief executive officer (CEO) Julian Dunkerton flagging up 'notable performances' from jackets and knitwear as the cold snap bit, as well as healthy sales of accessories given as seasonal gifts.
Gradually rebuilding confidence in its expansion story following earlier growing pains, SuperGroup opened five standalone stores during the quarter. Among them was its first owned store in Germany, also the first European store developed along the lines of a larger UK footprint model. Over in wholesale, third quarter sales skipped 5.4% higher to £25.3 million and Dunkerton reported an encouraging 20% uplift in the Spring/Summer 2013 order book.
Whilst SuperGroup's total sales fell 3.5% short of Panmure Gordon's £119.2 million forecast, the broker believes that 'Q4 wholesale revenues will be stimulated by partners seeing the strength of the retail like for likes', which demonstrate that despite concerns regarding longevity, the Superdry brand remains in rude health.
Canaccord Genuity analyst Wayne Brown believes the company's strong gross margins are likely to be reinvested into price, 'which should help improve the perception of Superdry as a good value product.'
SuperGroup is confident of meeting consensus market expectations for the year to April, pointing to pre-tax profits of £49.3 million. Following today's update, Panmure Gordon expects consensus to rise by 2 to 3% to £50.5 million, 'as today's new gross margin guidance along with sky rocketing like-for-like sales are digested.' Reassured by evidence of 'reinvigorated brand strength', the broker has raised its price target from 750p to 788p.
