SuperGroup starts to recover

SuperGroup ’s (SGP) share price fell 6 per cent on the back of its half-year results, despite the retailer's underlying pre-tax profits jumping 13 per cent on last year to £14.7m. The performance will have been helped by soft comparatives in the previous year, when the company was hit with a string of problems related to a new warehouse management system. However, management says it has dealt with these issues and chief executive Julian Dunkerton insists the business has stabilised, is improving infrastructure and better prepared than it was a year ago.

On the retail side, revenue was up 26.4 per cent to £92.4m and profits rose 4 per cent to £7.8m, significantly less than the £10m forecast by analysts mainly because of higher warehousing costs, which increased by more than the growth in sales, and gross margin dilution from clearance activity. In turn this caused the unit's underlying operating margins to fall by a hefty 200 basis points to 7.7 per cent. The lacklustre retail performance was partly offset by a better showing from wholesale which boosted operating profits by 20 per cent to £15.1m on sales up 4.4 per cent to £65.8m. Gross margins here benefited from falling cotton prices and better supplier terms. But while wholesale revenues in Europe and the rest of the world posted double digit rises, the UK operation saw a 25 per cent decline.

Broker Peel Hunt expects full-year EPS of 45.7p, rising to 47.2p in 2014 (2012: 37.9p).

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