SuperGroup surges as fourth quarter boosted by Idris and sportswear

SuperGroup lifted its full year profit guidance after a powerful fourth-quarter where retail sales from the street fashion group surpassed last year's strong performance.

The company, which operates under the Superdry clothing label and associated retail chain, said profit for the 52 week period to 23 April was expected to be between £72.5m and £74m.

This was after fourth-quarter total retail sales jumped 29.9%, with like-for-like (LFL) sales up 15.4% versus the 11.6% a year ago.

Wholesale sales rose 19.6% in the second half, reflecting strong "in-season" sales also driven largely by the buy-in of new ranges.

Full year LFL sales therefore rose 11.3% and led to a 21.1% leap in group revenue to £589.5m.

The strong fourth quarter was attributed to the e-commerce channel, the results of innovation from a full quarter of the new premium menswear Idris Elba label and women's sportswear, plus a small degree of currency benefit.

SuperGroup opened 24 net new stores across Europe, contributing to 136,000 square feet of new space in the year that represented year-on-year growth of 17.8%, with a strong pipeline of stores for the new financial year.

Outside of Europe, progress in North America and China was said to have continued as planned, with start-up losses in line with market guidance and leading to a small year-on-year dilution of operating margin.

"The group has traded robustly throughout the final quarter as we continue to deliver our strategy to create a global lifestyle brand," said chief executive Euan Sutherland, who pointed out that during the quarter the group had also paid its first dividend and retained £102m net cash to support the investment programme.

"Our focus remains on the extension of the Superdry brand and execution of clear growth opportunities, under-pinned by continued investment in infrastructure to strengthen our business."

Sutherland waved goodbye to James Holder, one of the founders and currently brand and design director, who is leaving the group to lead an design consultancy, SuperDesign Lab, that will focus on exclusive product innovation for SuperGroup.

Broker Canaccord estimated a 50 basis point (bps) hit to gross margins from China and US start-up costs, with the underlying margin up, by circa 10bps.

Canaccord analysts said the strong net cash position pointed to the potential for future special distributions to shareholders.

Independent retail analyst Nick Bubb said the stepping down of Holder as a director will "provide some encouragement" for short-traders as he is still a big shareholder.

Mike van Dulken, head of research at Accendo Markets, provided a more technical analysis of the share price, which was rallying more than 13% to 1,424p by 1000 BST on Thursday.

He noted that the shares had broken above recent 10-month support level of 1,200p and back above a key six-year intersecting trendline, with the next test being the 200-day moving average of 1,450p, levels last seen in early April.

"Overcoming the 2016 trend of falling highs is also a positive, especially if said trend line can turn supportive and help the shares back towards two-year highs around 1,700p.

"Even news of a co-founder’s semi-departure is being overlooked with investors evidently confident that brand consistency will not be at risk of unravelling like a loose thread from a hitherto solid seam."