1H17 RESULTS

Supergroup, owner of the Superdry apparel brand, reported 1H17 revenue growth of +31.1% year over year to £334.0 million, in line with the consensus estimate. New retail space growth contributed 15.0% to total sales growth. 1H17 retail revenue increased +25.0% year over year to £215.2 million. Retail comparable-store sales increased 12.8% year over year to £215.2 million. The company opened 12 owned stores in 1H17, all outside of the UK, and new store square footage increased by 19.0% year over year. Wholesale revenues grew 43.8% year over year to £118.8 million in 1H17. The impact of sterling weakness accounted for approximately one-third of reported sales growth in each of the group’s operating divisions. 1H17 gross margin is expected to contract by 130bps, mainly reflecting a greater share of lower-margin wholesale sales, as well as the dilutive impact from targeted clearance activity. The channel mix impact will contribute to about 80-90bps of gross margin erosion. Good progress continued to be made in development markets North America and China, and the brand continued to build traction in the US market with continued strong e-commerce growth and new store openings in Manhattan, Philadelphia and Orlando performing well.

2Q17 RESULTS

2Q17 retail sales increased 25.1% year over year and comparable sales increased 13.7% year over year.  The company expanded square footage by 18.9% and had 210 stores at the end of 2Q17.

GUIDANCE

The company expects 1H17 profit to fall in the range of £20-22 million, suggesting 9% year-over-year growth at the mid-point of the range, and FY17 profit to be in line with market expectations of £84.6 million. In 2H17, the company expects small gross margin accretion after some initial headwinds from input cost inflation. If this margin accretion is delivered, this would suggest FY17 gross margin erosion of 40-60bps. FY17 revenue consensus estimates stand at £694.5 million, implying annual year-over-year growth of 16.2%. Consensus expects operating profit of £85.0 million, implying an adjusted FY17 EBIT margin of 12.2%. FY17 EPS is forecast at £0.82, up 15.5% year over year.