Full-price strategy has to change at Supergroup, says Oriel Securities
The market had factored in some bad news ahead of Supergroup's profit warning on Friday, "but the quantum of the downgrade is greater than feared", according to Oriel Securities.
Superdry
7.40p
13:39 26/04/24
The broker retained its 'reduce' rating on the stock with a 760p target price, saying that the fashion retailer's "fanatical adoption" of a strategy to sell stock at full prices is inappropriate.
The comments came after Supergroup, famous for its Superdry brand, revealed that it was taking a "more cautious view" on its full-year results and now expects profits to come in at £60m-65m, compared with analysts' estimates of between £69m and £73m.
The firm blamed "the level of sector discounting and continuing weather-related uncertainty". However, management continue to target selling its clothes at full prices and would not give in to discounting.
Oriel said that the company's full-year price strategy "has to change" otherwise the retailer will continue to lose market share.
Oriel said: "Almost all clothing retailers will have a stock overhang now and fierce discounting is pretty much certain sooner rather than later, despite what had seemed to be a greater propensity to hold the collective nerve coming into peak season.
"Refusing to discount in the core stores is likely to leave Superdry clothing looking relatively expensive and whilst it must surely be a board discussion topic we understand there are no imminent plans to adapt the strategy."
The shares were down 8% at 814.61p by 11:34 on Friday.