SuperGroup Sales Slowdown Could Help Pace Growth
12 May 2011 - 10:56PM
Dow Jones News
Uber-trendy clothing retailer SuperGroup PLC (SGP.LN) fell from
market grace Thursday as its meteoric U.K. sales growth
unexpectedly slowed, but an evenly paced growth rate may be
beneficial for the brand if it is to avoid the pitfalls of
ubiquity.
The owner of the SuperDry and Cult premium clothing labels
Thursday said fourth quarter sales grew 39% in the U.K., well ahead
of market peers but sharply slower than the 92% seen in the third
quarter.
For a market more used to serial outperformance from the
retailer, the lower-than-expected growth rate sent shares in the
company down more than 20% in afternoon trade despite wholesale
revenue ahead of views and confirmation that SuperGroup will meet
market expectations for fiscal 2011 profit.
"The market had been expecting SuperGroup to comfortably beat
forecasts," Numis analyst Andy Wade told Dow Jones Newswires.
SuperGroup blamed the sales deceleration on the phasing of store
openings in the quarter and the fact that it didn't have full
summer stock in stores during the unseasonably warm early
spring.
SuperGroup's clothing, particularly its eponymous SuperDry
label, is worn by celebrities like David Beckham and Jude Law and
has built up an exclusive cachet that has made it one of the most
desirable premium casualwear ranges on the high street.
Retailing at around GBP50 for a hooded top and GBP80 for a pair
of jeans, SuperDry sits at the upper end of the high street
clothing market and by its very desirability has bucked the
macro-economic slump.
"I've always felt slightly oblivious to macro-economic
[effects]," Chief Executive Julian Dunkerton told Dow Jones
Newswires Thursday, because "we have the most in-demand brand."
The group's sales growth and its international expansion
opportunities have fueled the share premium that SuperGroup trades
on.
The company was valued at 23 times forward earnings for fiscal
2012, well ahead of a peer average of 12 times according to
Infinancials, although this fell to 19 times forward earnings after
Thursday's earnings.
Although the group is still trading ahead of its peers, Wade
said "we will need reassurance from future trading updates that
this issue was a seasonal mis-step, rather than a far more
concerning slowdown in brand momentum."
Fickle fashion has claimed its fair share of trendy brands, like
French Connection Group PLC's (FCCN.LN) FCUK brand which fell out
of favour several years ago, and the overexposure of the Burberry
PLC (BRBY.LN) brand in the early noughties which took several years
to rebuild.
"Brands have a finite market, and its a question of how quickly
you want to address this market," Espirito Santo analyst Sanjay
Vidyarthi said.
"While SuperGroup may evolve to deal with this issue, there is a
risk [particularly in the U.K.] of reaching saturation or
overexposure faster than you might do with brands that expand at a
more measured pace," he added.
SuperGroup opened 21 U.K. retail stores in fiscal 2011 and the
group has a similar number of openings earmarked for the U.K. this
year.
"Its a tricky balance" of growth and exposure, Isabel Cavill, a
senior retail analyst at industry insight group Planet Retail
said.
Clearly growth rates of 70% a year are unsustainable for any
retailer, she said, but SuperGroup's rate is reasonable for
now.
As the group has built an established brand they've looked for
quicker growth so "at the moment it's a fair pace, but [they
shouldn't] keep up [the pace] in terms of store openings," as that
could start to erode brand value.
By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293;
kathy.gordon@dowjones.com
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