LONDON (Alliance News) - FTSE 250-listed clothing retailer SuperGroup PLC on Thursday said its pretax profit rose in its 2015 financial year on the back of robust retail sales over the course of the year and said it has signed a joint venture deal to enter the Chinese market, as sales in the first quarter rose sharply against weak comparables.
Shares in SuperGroup were trading up 5.3% at 1,307.03 pence on Thursday afternoon, one of the best performers on the FTSE 250.
The Superdry brand owner said its pretax profit for the year to April 25 was GBP59.5 million, up from GBP45.2 million last year, when the group was hit by GBP16.8 million in exceptional charges, and beating RBC Capital Markets' forecast of GBP54 million.
Total revenue increased 12.9% to GBP486.6 million from GBP430.9 million, with retail revenue in the year rising 17%, and like-for-like sales growth in the period up 4.8%. Within the retail sales segment, the contribution from online sales increased to 18.2%. Wholesale revenue for the company was up by 4.9%.
In December, SuperGroup warned that it had suffered from a weaker sales performance during the first half of the year due to an unseasonably warm autumn, meaning it carried excess stock into the second half.
At the time it warned that this would hit gross margin for the full year saying that it would be broadly flat year-on-year. On Thursday the group revealed that its gross margin improved by 120 basis points to 60.9% from 59.7%.
Sales picked up in the second half of the year, benefiting from the peak Christmas trading period and as the cold weather from Boxing Day onwards helped prop up sales in the ranges that were hit during the warmer autumn.
Over the course of the year, SuperGroup added a further 82,000 square feet of trading space, increasing its retail portfolio in Europe to 715,000 square feet, a 13% rise. It opened 28 new international franchised and licence stores over the course of the year, increasing its total estate to 221.
The group added it has signed a joint venture deal with Trendy International Group for the Chinese market, which will allow it to enter China in a "controlled and managed way". It said the deal is for a minimum of ten years and will be funded by a combined investment of up to GBP18 million, though it anticipates it will be self-funding within two years of operation.
"China is a very exciting market and forecast to overtake the US as the largest apparel and footwear market in the world. Customer tastes are evolving from luxury brands to brands influenced by 'pop' culture and we believe that the Superdry brand, with the right product, pricing model and infrastructure, is well positioned to be successful," SuperGroup said.
SuperGroup said it has maintained its second half sales momentum in the first quarter of its current financial year, with retail revenue up by 35% in the first 10 weeks and rising by 20% on a like-for-like basis. The retailer did note that this performance was against weak year-earlier comparables when like-for-like sales declined 4.9%, but it does expect its 2016 underlying profit to be in line with market forecasts.
"Despite a challenging start to 2015, the business made good progress in the second half of the year, delivering healthy sales growth, developing our infrastructure and continuing to advance our product range as we incorporate extensive customer insight into our design process," said Euan Sutherland, SuperGroup's chief executive.
"The joint venture in China with Trendy International Group, together with an extensive pipeline of new stores in our targeted European markets and continued momentum in e-commerce, provides confidence of continued long-term growth," he added.
SuperGroup said it will pay a maiden dividend in the financial year 2016.
"We believe that the commercial model of the business allows us both to invest in new growth opportunities and return cash to shareholders," Chairman Peter Bamford said.
Investec analyst Kate Calvert is positive of SuperGroup's results and of its deal with Trendy. "It is an early stage roll-out story with potential to double its UK & European owned store base, plus franchise growth opportunities and longer-term upside from the US and now China," she said. "Also, we believe there is a material opportunity to improve UK profitability."
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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