LONDON (Alliance News) - SuperGroup PLC issued a profit warning on Friday morning, sending shares in the retailer spiralling lower, as it echoed the concerns aired by Next PLC earlier in the week that the continued warm weather in September and October in the UK and Europe has drawn a veil of uncertainty over the performance of autumn/winter ranges.
Shares in the group were down 8.6% to 809.00 pence in mid-morning trade, comfortably making it the worst performer in the FTSE 250.
The retailer said it would downgrade its full-year profit guidance to between GBP60 million and GBP65 million, down from the previous guidance of GBP67.1 million to GBP70.3 million.
It said that while the majority of its full-year profit comes in the second half of the year, the level of discounting in the clothing sector and the uncertainty caused by the unseasonably warm weather conditions in key markets meant it would have to cut its guidance.
The warning echoed that issued earlier in the week by rival Next, which cut its full-year earnings forecasts on the back weaker sales due to the warm autumn weather, which has delayed consumers buying winter clothing.
The news from Next dragged the entire retail sector down on Wednesday, as analysts said they expect other retailers to be hit by the problems.
Last week, figures from the Office for National Statistics showed retail sales were down more than expected in September, off 0.3% on a sharp contraction in clothing sales in the month.
For the second quarter to October 25, SuperGroup said its revenue increased 4.5% to GBP122.3 million, up from GBP117 million last year. Retail revenue was up 11.4% to GBP71 million in the period, from GBP63.8 million last year, but Wholesale revenue declined in the quarter, falling 3.7% to GBP51.3 million from GBP53.3 million a year earlier.
SuperGroup said that as it moves into its peak third quarter trading period, its stores are well prepared and its growth strategy remains on track and unchanged by the short-term external events impacting its operations.
Investec retained its Buy recommendation on the stock but cut its price target on the back of the warning, though analyst Katie Calvert said in a research note that the broker views "this as a market specific issue and believe the longer-term investment case remains intact".
Calvert said Supergroup was more exposed than many industry peers to the impact of warm weather conditions given the higher proportion of outerwear in its product portfolio.
Calvert said the broker has cut its pretax profit forecast for the year to GBP60.5 million, at the low end of the new guidance issued by the company, on the back of estimates for like-for-like sales growth in the Retail and Wholesale businesses to be lower than previously forecast. Calvert said the broker now expects like-for-like Retail sales for the year to see a 1.5% decline, against a previous forecast of 2% growth, with its estimate for Wholesale growth cut to 5% from 10%.
Liberum, which reiterated its Hold recommendation on the stock and which has an 1,150 pence price target on SuperGroup, said the retail sector is likely to face further gloom in coming weeks, with expectations for more bad news from Marks & Spencer Group PLC in its interims due next week.
Beyond this too, it expects further negativity to emerge from the upcoming results from Sweden's H&M Hennes & Mauritz AB and from ASOS PLC at the start of December.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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Marks & Spencer (MKS)
Next (NXT)
ASOS (ASC)
