SuperGroup, owner of the fashion chain SuperDry, says that it will not succumb to rising pressure on UK high streets by discounting clothing in its 72 retail stores over Christmas.
The retailer, known for its jackets, is keen to preserve full-price sales to boost its operating margin. This slumped nearly 10 per cent in the first half of the trading year due to problems with product distribution. The company said this would knock £8.8m off full-year pre-tax profits.
“We have £2m of extra stock that we’ll gently clear through our outlet stores, including Bicester Village, plus Ebay and sales to third parties such as M&M and TK Maxx,” said Julian Dunkerton, chief executive. “We are not having a sale in our main stores this January, and we remain happy with our formula.” Adding that he also believed retailers offering deep discounts before Christmas were making a “fundamental mistake,” he said: “The week before and the week after Christmas are the two biggest weeks for us, and I’m confident it’s going to be OK.”
Management believe the falling price of cotton will start to have a beneficial impact on margins from next spring. However, they are sticking with their policy of offering free delivery on internet orders to the UK, US and parts of Europe. This was behind a doubling of internet sales in the period, Mr Dunkerton said, but wiped nearly 2 per cent off the operating margin.
The retailer’s shares have lost 67 per cent of their value in the past year, after a series of operational gaffes and fears that the brand is becoming overexposed.
Shares perked up by an initial 8 per cent on Wednesday, after half-year results showed a 39 per cent increase in pre-tax profits to £20.3m in the six months to October 30. Revenues rose 51 per cent to £136m, compared to the same period a year ago.
Reporting a 4 per cent rise in overall like-for-like sales, analysts said most of the gains came from online rather than instore sales.
“SuperGroup is obviously a fast-growing business, but we’re slightly concerned that the range of pre-tax profit estimates for next year is so wide at £60m to £90m,” said Sanjay Vidyarthi, retail analyst at Espirito Santo, who is at the lower end of forecasts with £62m.
Broker Peel Hunt said it expected to cut its 2012 pre-tax profit forecast from £90m to £70m “reflecting much slower sales-growth expectations.”
“Management are still not giving much guidance on cost growth,” Mr Vidyarthi added. “They need to deliver consistently over the next year before we can be confident the business has evolved into a long-term sustainable model.”
On Wednesday, SuperGroup shares were up 6.9 per cent at 537p in late London trading.