SuperGroup´s shares plunge 25% due to IT failure

Thursday, 06 October 2011

It was a busy day in the London Stock Exchange on Wednesday as SuperGroup, which owns the Superdry brand, warned that a malfunction with its new warehouse IT system had left stores short of stock and that the resulting loss of sales would knock £6m to £9m off its profit.

SuperDry´s owner´s shares lost more than a quarter of their value on Wednesday after the international fashion chain warned that stock management problems would wipe up to £9m from full-year profit. SuperGroup, which raised £120m from a London initial public offering last year, was previously forecast to report annual pre-tax profits of £64.3m, up from £47.3m last year.As claimed by the company, the IT problems caused a significant reduction both in the amount of stock and range of sizes of its trademark T-shirts, hooded tops, check shirts and jogging bottoms. City analysts consulted by the Financial Times downgraded profit forecasts and said that the profits warning was another blow to the company's credibility following a poorly received trading statement earlier this year.


Jonathan Pritchard, retail analyst at Oriel Securities, said Wednesday: "Supergroup's profit warning betrays a fundamental lack of management control at this retailer. Yes, it is growing quickly, but for its distribution network to be unable to correctly stock its stores for the second season running is unforgiveable." A conference call between analysts and management was disrupted on Wednesday by an institutional shareholder demanding that the placing of SuperGroup stock 10 days ago be investigated. Bob Brown, chairman of fund management RC Brown, told The Telegraph: "We are naturally concerned that a placing of stock took place before the announcement. We are attempting to establish via the company's brokers, Seymour Pierce, whether, or to what extent, this problem was known by the company's directors at the time of the placing."
 
At the other shore of the Atlantic, Zacks Equity Research highlighted the importance of recent GIII Apparel Group announcement about how its board of directors has approved a share repurchase program worth $2 million. The repurchase will be executed from time to time in the open market as well as through privately-negotiated transactions based on market conditions, stock price and other factors.
 
“We appreciate G-III’s effort to bolster shareholders’ value over the long term. Moreover, an increase in share buy-back authorization affirms the company’s optimistic outlook and reflects strong growth going forward. However, we believe the strategic move is aimed at capitalizing a relatively undervalued share price arising from the volatility in the market and soft second-quarter 2011 results”, they said in a note to investors.  As of July 31, 2011, G-III had about 20.3 million shares trading in the market. The stock had historically traded between $20.44 and $45.38 over the last 12 months. Currently, the common shares of the company are trading toward its lower range. In the recently concluded quarter, G-III posted earnings per share of 8 cents missing the Zacks Consensus Estimate of 20 cents and the year-ago quarter earnings of 15 cents per share. The lower-than-expected result was mainly due to 370 basis points fall in gross margin, reminded from Zacks.
 
Angela González-Rodríguez

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