SuperGroup's strong growth in tough market fails to impress

Boosted significantly by the weak pound, SuperGroup grew its annual revenues 27% and said its full year profits were likely to be in line with expectations.

A short trading update from the company for period up to its 29 April year end confirmed the Superdry-owning youth fashion company maintained strong momentum through the fourth quarter to lift retail like-for-like sales 9.4%.

This will take group full year LFL growth to 12.7%, which was helped by a 35% mushrooming of online sales and almost 43% from wholesale.

There were 26 new Superdry shops opened in the year, of which

With gross margin showing no year on year improvement across the second half but offset by adverse foreign exchange and the margin-dilutive effect of faster wholesale growth, full year profit will be £86-87m, up 19% on the previous year, less than some analysts had hoped.

Chief executive Euan Sutherland said the focus would stay on the global multi-channel strategy he outlined after taking over two years ago.

He said the sales and profit growth was down to "improving our product ranges and introducing new categories to excite, inspire and maintain the brand's relevance while, in parallel, investing in our development markets and improving our infrastructure.

"With a clear strategy and a number of long term opportunities to establish Superdry as a global lifestyle brand we remain confident in the continued delivery of sustainable revenue and profit growth."

He said the North America and China operations continued to perform in line with their respective plans, with the USA breaking even thanks to continued strong e-commerce growth, improving store LFL performances and encouraging performances from new store.

Despite the strong performance, shares in the company dropped almost 7% after the first hour of trading on Thursday.

Analysts at Liberum applauded the "commendable achievement" of maintaining overall momentum but downgraded the shares to 'hold' due to the lack of upgrades.

"We believe the market should be disappointed with the lack of upgrades despite a strong top line performance, suggesting low profit conversion, a change in underlying channel mix and much greater FX impact than anticipated," they said in a note to clients.

Investec analyst Kate Calvert kept her 'buy', lauding the strong finish to the year against tough comparatives last year and a tricky market backdrop "which shows the brand’s robustness".

She noted the forex is expected to become more of a headwind in the new financial year but that management has said it plans to offset high COGS with cost efficiencies rather than pass on to the consumer, adding that the valuation was "undemanding for a company capable of delivering sustainable mid-high teen earnings growth".