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The new face of SuperGroup

SuperGroup's management team has unveiled a strategy for the brand - and announced that shareholders are in line for dividend payments this year.
April 1, 2015

SuperGroup (SGP) has had its fair share of ups and downs this past year. But now, the new chief executive Euan Sutherland has unveiled big plans for the brand. The most headline-grabbing of these is Idris Elba, the UK actor who starred as Nelson Mandela in Long Walk to Freedom. He'll be the new, mature, classier face of Superdry and will help design a line of premium clothing.

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This might seem a trivial point from an investment perspective, but it symbolises the central plank of SuperGroup's new strategy: broadening the appeal.

"When I joined a few months ago there were questions around the longevity of the brand after some periods of negative like-for-like sales," says Mr Sutherland. But after looking into the problem he says the brand is, in fact, strongly positioned to "stretch" to new customers. From now on, there will be less emphasis on the logo-riddled tops and graphic T-shirts and hoodies SuperGroup is known for. Instead, the focus will be on developing a more broad-based premium range. That's management speak for more expensive, sophisticated clothing to attract older, richer shoppers, rather than the 18-24 key age group. That said, Mr Sutherland insists SuperGroup won't "move away from our core". He sees a lot of potential in womenswear, which, in contrast to most other high-street retailers, makes up a smaller proportion of sales than menswear. Denim and footwear are other areas of potential growth, as well as posh sports kit, such as rugby, ski and snow garb.

The other big news is that SuperGroup has bought back its distribution rights in North America - for £22.3m - having terminated a 30-year licence agreement with its US partner. This follows similar acquisitions in Scandinavia, Spain and Germany. The US business made a £5.1m loss in the year to December 2014, on £20m-worth of sales. Mr Sutherland blamed the US licensee for failing to expand effectively. With the stores back in hand, he reckons management can "reduce losses very quickly" over the next two years, for which there is a "clear plan", including changing the range, pricing and relocating stores. The target is to halve losses this financial year and turn a profit in 2017. Only after that will the North American business be in a position to expand.

As for the price tag on the Stateside operations, it seems pretty reasonable: one times sales and at net asset value, funded by the group's bountiful cash reserves. Mr Sutherland says it included stock, shop fixtures and fittings and 15 leases. What it does mean, however, is extra costs. In 2015 one-off transaction costs will total £700,000, plus another £9m of other costs, and a further £8m of charges in 2016.

As for the rest of SuperGroup, the UK, with just under 100 stores, is pretty much fully mature. The next expansion area will be in Europe, in particular Germany, Austria, Poland, Spain and Italy. "The business is very much more in control," says Mr Sutherland. "There have been unfortunate announcements in the past, but what we are driving now is sustainable long-term growth."

To show investors it means business, the company has announced it's first dividend payment. It will come as an interim dividend in October, in respect of the financial year to April 2016, covered three to 3.5 times over. Pre-tax profit guidance for the full year remains unchanged at £60m-£65m.

Elsewhere, figures from the high street are a real mixed bag. While ONS data suggests sentiment is improving, the BDO High Street Sales Tracker, a weekly sales index from accountancy firm BDO, was less upbeat, and probably offers a more accurate picture of underlying trading, given that it uses like-for-like sales. According to its data, like-for-like sales, excluding online, fell 0.2 per cent in February. Homewares grew 7 per cent, but the fashion and lifestyle categories sales both reported declines. Online sales, meanwhile, climbed 22 per cent.