Putting the super back into Supergroup

When a company develops a reputation for being accident prone, what it really needs is a prolonged period where the management does not drop the ball, and Tuesday's first quarter results from Supergroup suggest that the new management team, collectively, has a safe pair of hands.

Going up against extremely tough comparative figures from a year before, not to mention indifferent weather which might have deterred shoppers, the faux Americana apparel seller saw like-for-like (LFL) retail sales rise 1.7% in the 13 weeks to July 29th from a year earlier.

In the corresponding period of 2011 LFL sales in the retail division were up 14.8%, so obviously this year's performance represents a sharp slow-down in growth, but given that some of the company's well-publicised problems in the past have come from growing too fast, perhaps a more measured growth rate might not be a bad thing.

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Panmure Gordon was suitably impressed, as it had forecast flat LFL sales growth, and it claimed that the results "show that Supergroup's product offering was one of the few winners of the UK's monsoon summer."

The performance of the Wholesale division was a little disappointing in Seymour Pierce's eyes, with sales down 5.6% from a year earlier. Supergroup said this reflected differences in the timing of stock despatches to UK and international partners.

"A more representative reflection of current performance is the order book for Autumn/Winter 2012, which shows an uplift of around 7% on last year for the season as a whole," the company said.

Impressive though the figures were, Seymour Pierce said it would not be making any changes to its fiscal 2013 (FY13) pre-tax profit forecast of £52m, or its FY14 forecast of £59m.

Panmure Gordon, however, has raised its forecasts and with them its price target, which had been 470p but which is now 550p. The broker still rates the shares as no more than a "hold", however, after their recent good run.

The important thing, though, so far as the market is concerned, is repairing reputational damage.

"Today's statement is early evidence that our gut feel (of stronger management in the form of a new FD [finance director] and, especially, a new COO [chief operating officer]) may be correct," said Panmure Gordon's Jean Roche.

Seymour Pierce's Freddie George strikes up a similar theme. "Over the last two years, the company appears to have been largely focused on building up the infrastructure to manage the mushrooming scale of the business. It is now well placed, in our view, to exploit the opportunities, largely untapped and identified at the time of the IPO [flotation], following management changes and improvements to the assortment."

Seymour Pierce rates the shares a "buy" and has a price target of 600p.

JH