Shares in SuperGroup have slumped more than 10% on fears that the fashion retailer could be hit by an excess of stock across the sector, leading to discounting to boost sales ahead of Christmas.
The company behind the Superdry brand, which reports half year results on Wednesday, is down 171p to £14.48 having fallen as low as £14.04.
Analysts at Liberum said SuperGroup has 20% off promotions, less than the 50% at Gap and the 60% at H&M but a sign of how mild weather has meant too much inventory in the clothing sector and how tough the retail business is at the moment. Liberum has cut its recommendation from buy to hold and their target price to £15. Analyst Tom Gadsby said:
We upgraded our target price and forecasts on 6 November but today move to hold. Investors will quite rightly ask what has changed. We caveated our upgrade with concerns over inventory and increasing competition; since then we note promotional activity in stores and online, no more than last year, but off what should be a more solid trading base. The shares are up 85% since we upgraded to a buy last December. The moment has come to take profits.
Promotions elsewhere on the High Street are deep, up to 60%; and we see promotional activity, both in store and on line at SuperGroup, not necessarily more than last year, but surprising given the strength of second quarter sales leading into the period. Sales comparators get much tougher in the second half and with 75% of group profits to come from the second half as well we see little room for error.
On Wednesday’s update, he said:
First half sales were strong but scope for positive surprises is limited. First half retail sales grew 17% versus a 12% decline in the prior year while second half comparisons are up 4%, a tougher hurdle.
