SuperGroup issued a profit warning as it became the latest fashion chain to be hit by the unseasonably warm autumn weather.
Shares in the group, owner of the Superdry brand, worn by the likes of David Beckham and Pixie Lott, fell 6.2% as it said full year profits could be up to 12% below previous expectations as shoppers put off buying coats, jackets and knitwear.
The warning is a disappointing debut for SuperGroup’s new chief executive Euan Sutherland, the former Co-operative Group boss who walked out after 10 months in charge of the troubled business.
Sales at SuperGroup stores open more than a year slumped by 4.2% in the three months to 25 October and wholesale sales slumped 3.7% to £51.3m. The company warned that “continuing weather related uncertainty” and a high level of discounting across the high street meant it was uncertain about the prospects for its autumn/winter season. It expects full year profits of between £60m and £65m compared with expectations of up to £73m.
Sutherland, who joined the company 10 days before the profit warning, said the sales problems were due to the weather. “To have 21 degrees at Halloween is quite unusual. It’s a short-term impact we are seeing and everybody else is seeing. Longer-term growth opportunity and prospects are good and I’m in good spirits about that,” he said. He said sales of polo shirts and T-shirts were seeing double-digit increases in sales.
Kate Calvert, an analyst at Investec, said SuperGroup was more exposed to the heatwave than most fashion chains because outerwear was a higher proportion of sales. But she said: “We view this as a market specific issue and believe the longer term investment case remains intact.”
Jonathan Pritchard, an analyst at Oriel Securities, said SuperGroup’s “fanatical” avoidance of discounting could be harming the business.
“Almost all clothing retailers will have a stock overhang now and fierce discounting is pretty much certain sooner rather than later, despite what had seemed to be a greater propensity to hold the collective nerve coming into peak season. Refusing to discount in the core stores is likely to leave Superdry clothing looking relatively expensive,” he said.
SuperGroup’s warning comes days after one of the UK’s most respected fashion chains, Next, admitted that its profits would be 3% less than anticipated as a result of the warm weather. As the UK enjoys one of the warmest Halloweens on record, analysts are concerned that fashion chains including Marks & Spencer and Primark, both of which report on their trading performance next week, will also take a profits hit.
Shaun Wills, chief financial officer of SuperGroup, said it was difficult to tell if there was more discounting around on the high street than last year but it had definitely come earlier, and might well last through to Christmas.
“The last seven to eight weeks has spooked people and it’s easy to see that going on,” he said.
Sutherland said SuperGroup would not be discounting heavily to try and win sales during the warm weather and suggested that those retailers indulging in such activity were wasting their time. “I’m not sure it is doing them much good. If the fish are not biting there is no point putting extra bait in. It is just too warm,” he said.
