Premium quality clothing seller Superdry (SDRY), which changed its name from SuperGroup this week, cheapens 3% to £19.79 despite issuing strong results for the half year ended 28 October.
Sales and profits are up by more than 20% and there’s a 19.2% hike in the dividend to 9.3p, so what’s not to like?
The answer is that investors appear disappointed by the Superdry brand owner’s solid rather than spectacular Christmas performance, though this should be viewed in the context of last year’s ‘stretching comparatives’ according to the Cheltenham-based company.
Superdry was expected to perform strongly this Christmas, so an absence of additional earnings upgrades is also dragging on the stock.
MATERIAL SLOWDOWN
For the 10 weeks to 6 January, the jackets, hoodies and footwear seller’s retail like-for-like sales grew by a credible 4.7%, although this represents a material slowdown on the 14.9% like-for-like growth served up last Christmas and the 6.3% seen in the first half of the financial year.
Superdry’s total revenue grew by a solid 12.6% over the peak period, though again, this represents a slowdown from the 20.4% growth delivered in the first half.
Within retail, as across the industry this Christmas, e-commerce was the main driver for internationally expansionist Superdry, a brand sold in some 148 countries, with online revenues rocketing 30.5% higher over the festive period.
And as Liberum Capital explains: ‘Based on further management commentary this morning, Retail store only like-for-likes for the peak Christmas period were in the region of -3.5% to -4%, which compares to around -2% achieved in the first half period.’
Bears are also seizing on a drop in first half gross margins, reflecting a mix impact from strong wholesale revenue growth, Superdry’s decision to absorb cost inflation rather than pass it onto customers, as well as management’s ongoing plan to reduce overall stock levels.
CEO Euan Sutherland insists ‘Superdry has further strengthened its position as a Global Digital Brand obsessed with quality and design. We have delivered another strong performance demonstrating the unique advantages and attractiveness of Superdry and its relevance to customers around the globe.
'Our growth through our eight channels to market has further diversified the brand, both geographically and across channels, while continued innovation has further widened our product offer.'
ABSENCE OF EARNINGS UPGRADES
‘Having traded through our peak trading period, the board remains confident in delivering full year underlying profit before income tax in line with the range of analyst expectations’, continues Sutherland, highlighting a consensus pre-tax profit range of £97.7m to £100.6m and basically telling analysts to maintain rather than upgrade their estimates.
‘Following today's reporting we raise our target price to £21,’ writes Liberum, upgrading from £17.50, though the broker is ‘maintaining our hold recommendation. Our new target price reflects greater confidence in full year numbers as the company has traded through peak and there is no change to guidance.’
Superdry’s festive growth slowdown may be weighing on the shares today. Yet bulls will note that consensus estimates for the year to April point to sales of £874m, for 16% growth year-on-year, as well as a 14% surge in pre-tax profit to £98.9m.
