SuperGroup (SGP) last month said full-year profits would come in towards the bottom end of brokers' expectations, which then ranged from £61.1m to £65.2m at the pre-tax level. The update, which blamed a weaker-than-expected fourth quarter, prompted some downgrades and sent the shares plummeting.
As we stated in our recent tip update, however, we believe SuperGroup's long-term growth story remains intact, and therefore that the sell-off has been overdone. The company is still set to report retail sales growth in the high teens, double-digit increases in its wholesale division and 18 per cent profit growth. And, given the amount of infrastructure investment that has been completed, SuperGroup should also now benefit from operational leverage. The balance sheet is in good health, and news that it has taken control of its Scandinavian distributor is a welcome development. We hope the results will also offer further details on overseas growth.
