While the chill wind blowing across the UK hasn’t helped fashion retailers in general, the cold snap could well have played into the hands of SuperGroup (SGP). Brisker-than-predicted sales of jackets, hoods and knitwear could prompt upgrades at the Superdry brand-owner’s fourth quarter update next month (9 May).
The Cheltenham-headquartered outfit has momentum at its heels, with strong trading over the festive period to 27 January flagged in the third-quarter update(7 Feb). Retail like-for-like sales rose 10.6%, buoyed by strong performances from jackets and knitwear. There is every chance a chilly February and the coldest March for fifty years have provided SuperGroup with a further boost.
This week’s (9 Apr) British Retail Consortium (BRC) data showed UK retail sales slowed in March as the unseasonably cold weather hit the fashion brands. This may have had a modest impact on demand for SuperGroup’s Spring and Summer ranges. Yet anecdotal evidence suggests the retailer’s jackets continue to fly off the shelves and confirmation of a bumper fourth quarter could easily prompt analysts to nudge up estimates.
The youth fashion firm’s strengthened executive team is managing growth better and risks to the £512 million cap’s outer-year estimates are skewed to the upside. Supporters argue the Superdry brand, which uses logos, classic American designs and Japanese imagery, has truly global appeal. Accordingly, the company is expanding internationally through a low-risk franchise model. Internet sales are a little over 10% of the business, so there is scope for further web-based progress while product range expansion into womenswear, beauty, jeans and underwear should turbo-charge growth prospects too.
Investec Securities’ Bethany Hocking has kick-started coverage with a ‘buy’ and 843p price target implying attractive 30% upside. The analyst forecasts 19% growth in taxable profits to £50.9 million for the year ending 28 April, ahead of a 16% increase to £59 million by April 2014, although those estimates could yet prove conservative.
Shares says: Buy SuperGroup at 641.5p.
