Has Superdry found its kryptonite?

SuperGroup's superhuman sales growth is slowing. Hardly a disaster, but the group should heed the warning that it's not invincible...

by Dave Waller
Last Updated: 06 Nov 2012
Sales at the group behind the hip Superdry label were up 39% on this time last year, which under normal circumstances would be pretty impressive. But for a group that’s become known for its superhuman performances, could it be a sign that something’s up?

Group sales growth slipped to a ‘mere’ 61% to £66m in the final quarter, down from 91% in the third-quarter. It seems that even super brands have a weakness. SuperGroup’s seems to be inexperience, which meant it missed out on the good weather – and for a fashion retailer that should have been a golden opportunity. While blaming the timing of store openings (only one in Q4 this year against six last year), chief exec Julian Dunkerton admitted that when the mercury started rising recently it was left with ‘too many hoodies and jackets and not enough flip-flops and shorts’.

Now the last thing a promising company needs in this kind of environment is to make mistakes that make retail any more of a struggle. Indeed, only a few months ago Superdry was featured on this site admitting fears over the rising cost of raw materials. Today’s news disappointed the City, and pushed its shares down 19.9 per cent to £12.61 – despite pre-tax profits being set to hit market expectations of £48m-£54m.

But you can’t really knock its performance too much. SuperGroup opened 21 standalone UK stores in the year to May, bringing its total to 60, and Dunkerton describes its opportunities as ‘quite frightening’– the group has opened 44 international stores over the 12-month period, gaining a foothold in continental Europe, the US, Australia and Asia; it’s committed to opening 20 new stores in the UK each year, and is also gunning for China too. Meanwhile online sales grew in the final quarter by ‘more than 180%’.

It’ll be interesting to see what happens. SuperGroup will certainly face its challenges, not least the difficult tightrope of trying to maintain its cachet at a time when it seems everyone and their dog is wearing it. But it seems to be working, and it’s great to see an international retail success coming out of the UK.

Dunkerton remains typically super-confident, but he may wish to heed the lesson: screw up too many times when you’re trading on this kind of multiple and you may find yourself flying out of favour faster than a speeding bullet.

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