Supergroup sees profits leap but warns of higher costs

By This Is Money
Updated: 06:03 EDT, 15 December 2010

Superdry fashion firm Supergroup reported a 68% surge in half-year profits today but warned rising raw material prices could hit earnings next year.

Cut and dried: The groups Superdry brand has exploded.

The group, which now has 55 stand-alone stores and 69 concessions, posted underlying pre-tax profits of £13.5m in the six months to October 31, as retail sales leapt 70% to £54.5m.

While the Christmas season has started well and the spring/summer order book at its wholesale division is looking strong, Supergroup is still cautious over its outlook in the face of rising costs, such as cotton, which recently hit 15-year-highs.

Supergroup, which operates from Superdry and Cult stores, joins retailers such as Next and Primark-owner Associated British Foods in raising fears over escalating commodity prices.

Supergroup's cautious outlook triggered a 16% slide in shares at one stage today, having nearly trebled in value in the last six months.

The business began life on a market stall in Cheltenham, Gloucestershire, more than 20 years ago but floated nearly a third of the business in March to fund growth - triggering a huge windfall for directors including founder Julian Dunkerton.

The company, which targets the youth fashion market, has expanded aggressively, opening new stores and extending its clothing range.

In the first half of the current financial year, Supergroup opened 14 new stores and 13 concessions. It also opened its first concession in Harrods on December 7.

Supergroup said the retail division was benefiting from high demand for its new autumn/winter range.

The wholesale division, which sells the Superdry brand to international distributors, franchisees, licensees and independent retailers, delivered £35.9m of revenue, up 56% on the previous year.

Supergroup said it focused on expanding its franchise and licensee stores in Korea, Dubai, the US and Australia in the period.

Looking ahead, the firm said: 'The business has an enviable list of opportunities for both divisions. Increases in raw material prices may affect gross margins in the next financial year, however, we will keep these under review and expect our margins to return to more normal levels by financial year 2013.'

Mark Photiades, a retail analyst at Singer Capital, said the results came in slightly ahead of forecast.

He said: 'No formal data has been given on current trading, however management states that the early signs of Christmas trade are encouraging and the new collections have been well received. The spring order book is strong as is the pipeline of new stores.'