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SuperGroup reports 13% rise in first half profits after troubled year

Category : Business

Owner of Superdry brand claws back credibility after series of profit warnings and mistakes including accounting errors

SuperGroup, the company behind the Superdry fashion brand, has sought to draw a line under a turbulent year as it reported a 13% rise in first half profits.

Shares in the retailer, whose celebrity fans include Pippa Middleton and the singer Ed Sheeran, have more than doubled over the past six months as the management has clawed back its credibility after a series of profit warnings and mistakes – including a misfiring IT system and accounting errors – that weighed heavily on the company’s value.

“We are better organised than we were a year ago, and I am feeling as positive as a retailer can feel, given the current economic conditions,” said its co-founder and chief executive Julian Dunkerton, before the busiest sales weeks of the year. “If you go into any shopping mall and look how busy we are compared to other people … I think you will realise that we are on track.”

SuperGroup made an underlying pre-tax profit of £14.7m in the six months to 28 October which was in line with analysts’ expectations and up from £13m made in the same period last year. The retailer said sales of its trademark T-shirts, hooded tops, checked shirts and jogging bottoms rose 16.2% to £158.2m, as the firm reaped the benefits of an expanded product range, which includes more knitwear and denim styles, as well as behind-the-scenes improvements. UK like-for-like sales were up 3.9%, while wholesale orders increased nearly 8%.

Some analysts worry that the Superdry brand is losing its cachet in the trend-conscious youth market but Dunkerton batted the concerns away: “The most important thing is does your product progress? Have you got diversity of product to capture different parts of the population?”

Dunkerton did not provide an update on current trading but said like-for-like sales remained “positive”. However despite his confidence that SuperGroup was in good shape for the Christmas trading period and could deliver on full-year profit targets, some analysts still have concerns and the firm’s shares closed down more than 6% on Wednesday. “Our view remains that consensus expectations of circa £50m profit before tax for the current financial year are too high as the cost of growth becomes apparent,” said Espirito Santo Investment Bank analyst Sanjay Vidyarthi, who is forecasting profits of £40m and rates the shares a sell.

SuperGroup shares have had a rollercoaster ride since their stock market debut in 2010. After listing at 500p, the shares rocketed to a high of £18.99 in early 2011. But the trio of profit warnings coupled with a litany of management mistakes, including “arithmetic errors” have taken their toll. In the summer Theo Karpathios, who co-founded the retailer with Dunkerton, left the business, although it was denied he had fallen out with his co-founder. Despite the recent rally, the shares are still well down on the high of £18.99 set in early 2011 and closed down 39.5p at 557p.

To right the ship, Dunkerton has made a series of management changes, including poaching Susanne Given from John Lewis as chief operating officer and installing Shaun Wills as finance director.

Seymour Pierce analyst Freddie George, who rates the shares a buy, said the new management team had “steadied the ship”. “For the last six months, there have encouragingly been no surprises with the quarterly or interim figures.”

Savvy students ditch union bar for retail ‘lock-ins’

Category : Business

Chain stores and landlords are offering freshers massive savings in a new kind of organised shopping event

On a cold and wet Monday night in Bristol, office workers trudge home as an alternative crowd of young people in skinny jeans and hooded tops weaves its way towards the source of pounding dance music coming from the city centre.

It’s only 6pm, but a DJ battle is in full swing and free vodka shots are doing the rounds, the hallmarks of a student night. But the venue is not their favourite local haunt, Motion, it’s the Cabot Circus shopping centre. This so-called “student lock-in” aims to fill the shop floor rather than the dance floor.

The timing of the event is no accident. It’s early in the new term and freshers, courtesy of either the Student Loans Company or the bank of mum and dad, are still flush with cash and eager to fit in with fashion-conscious peers.

Fashion retailers Topshop, Republic and New Look are among the brands offering a “20% double discount” while Superdry is heaving as newcomers to the Bristol student scene kit themselves out with hoodies, checked shirts and jogging bottoms to look the part back at halls. “I love Superdry, but it’s really expensive, so I usually go to the outlet store near where I live,” says trainee teacher Jasmine Redman, clutching one of its bright orange carrier bags. “You never get a discount, so 20% off is a massive saving.”

Despite being under greater financial pressure than ever before, the student masses still have substantial spending power. With 2.5 million people in higher education, their annual spending power is put at as much as £15bn by marketing agency Campus Group. “Students are still spending on products they want,” says Sharon Leeson, head of commercial development for student discount card NUS extra. “But because of increasing financial pressures, the choices students make are changing. They are looking for money-saving offers, an experience and ultimately, value for money.”

A recent report by NUS Services, an arm of the National Union of Students, found, perhaps predictably, that many spend a significant proportion of their income on alcoholic drinks, clothing and eating out, with some 29% holding down a part-time job during term time to supplement their income.

The “student lock-in” was one of nine hosted by property firm Land Securities this autumn. Helen Morgan, its marketing manager for the south-west, uses them to attract new shoppers to its centres and build loyalty: “Our experience is students do seem to have the cash to spend at these events. In [St David's in] Cardiff we had 22,000 students and they spent £500,000 in two-and-a-half hours. Fees are not affecting disposable income.”

The marketing events not only tap into Britons’ growing love affair with shopping centres – which, with the addition of cinemas and upmarket restaurants, are increasingly viewed as a day out – but are a shot in the arm for retailers hit by a decline in footfall as higher food and fuel bills force people to cut back on trips to the shops. Land Securities has experimented with other formats, hosting a “Ladies’ Night” at the St David’s centre with the promise of “makeovers, pampering and a glamorous party atmosphere” that attracted 7,000 shoppers.

Back in Bristol, while students favouring the preppy look have made a beeline for Superdry, the indie music crowd has marched on American Apparel and Urban Outfitters. But based on queues alone, footwear retailer Schuh has won the battle for hearts and minds, with more than 50 customers waiting patiently in line. “Vans” is why architecture student Katie New is there. She works part-time in the nearby branch of Next and says: “The discount makes [tonight] worthwhile.”

Annie Achieng, womenswear manager at the Urban Outfitters store, says loan payments at the start of each term have an effect on spending patterns: “In the days before student loans get paid, footfall goes up as people come in to look at what they are going to buy.” Shoppers are buying an average of three items and the retailer is enjoying a strong run on skater skirts, shiny leggings and denim shorts as the “skater girl” look holds sway on campus.

The student lock-ins are run in partnership with events firm Total Students and Tudor Barber, one of its sales managers, says the events are considered a welcome alternative to booze-fuelled nights out: “If they don’t want to spend anything they can still come to a lock-in to chill out and catch up with friends.”

There are clear signs of savvy shopping, with Schuh store manager Sam Brown reporting that students are using the extra discount to buy two or three pairs of new shoes rather than one. “Converse, Vans and Uggs are generally up there with the student bestsellers,” she adds.

As a barometer of brands that resonate with young shoppers, the events also throw up anomalies. Jeweller Swarovski is a surprise hit with Exeter’s student body. It turns out that it is a big hit with international students, as its necklaces and bracelets cost more overseas. Cath Kidston is another surprise winner, with students scrabbling to get their hands on its chintzy floral book-bags and homewares. The events also highlight pockets of wealth. “In Exeter there is definitely more money – 5,000 students turned out and the stores took over £130,000,” says Morgan.

Early figures from the Bristol event suggested a turnout of 17,500 and £375,000 of spending. Schuh reported sales were up 180% on the previous year’s event and described the increase as “stunning”. Superdry owner SuperGroup was also enthusiastic, saying the event had “surpassed expectations”.

But with the average student debt put at around £26,000 these days, are students being encouraged to spend money they don’t have? The answer from Redman is emphatically no: “I think students are thinking it’s a discount and want to shop anyway.”

Superdry struggles as logo look wanes

Category : Business

Profit warning and plummeting shares at SuperGroup don’t look good, but the brand is not broken, just tired, say analysts

Its heavily logoed T-shirts, hooded tops, jackets and dresses are worn by celebrities from Kate Winslet and Pixie Lott to David Beckham and Zac Efron. But the phenomenal growth enjoyed in recent years by SuperGroup – the owner of Superdry, one of the most popular young fashion chains in the UK – has suffered a huge knock.

Once the darling of the stock market, SuperGroup saw its share price plunge 40% on Friday after a shock profit warning. And it’s not just investors who are losing faith. Fashionistas say the Superdry brand, which burst on to the scene in 2004 with its vintage Americana look topped off by Japanese script, is looking tired.

“Fashion is a bit will-o’-the-wisp – you can never rely on the same formula,” says Melanie Rickey, fashion blogger and contributing editor to Grazia and Pop magazines. “The last brand that captured the mainstream British public in that sloganeering way was FCUK. Superdry have taken over from them, but the market tires easily and moves on.”

She says Superdry can’t afford to stand still, when rival Uniqlo, for example, makes a better job of “poppy basics”, refreshing colours, fabric and typography. Uniqlo, she says, is a more democratic brand. “You’re either a Superdry person or you’re not, whereas anyone can be a Uniqlo shopper.”

City analysts may not be known for their fashion sense, but on the subject of Superdry’s fading allure, they agree with the trendsetters. Freddie George, at house broker Seymour Pierce, says: “There has been less celebrity endorsement for their ranges. They rely a lot on staples but have got to broaden their ranges and increase levels of newness.”

Superdry was born in 2003 out of the Cult Clothing stores opened by Julian Dunkerton, mostly in university towns, over the previous two decades. He teamed up with designer James Holder, who had created the Bench brand, to come up with a new in-house line. The first Superdry shop opened in London’s Covent Garden the following year, and the chain grew rapidly to 80 UK shops and 70 concessions in department stores, as well as 145 international stores today.

More recently criticism of the ranges has increased, particularly of the prominent use of branding on garments. “Mundane” is how fashion blogger Charlie Porter describes Superdry’s “pretty basic versions of utility clothing”. He adds: “You need to do something else. Clothes have to be more than just a brand. Nike and Adidas work because they are performance gear.”

SuperGroup was one of the most successful flotations of 2010 when it debuted on the stock market at 500p. The shares rocketed and hit £18.99 in February last year, but have since fallen sharply, to 351.8p. On Friday, a third profit warning since October sent the shares down nearly 40%. It now expects to make a profit before tax of £43m this year, compared with £50m forecast in February. Last year it made a £47m profit (which was more than double the previous year).

City analysts took a knife to their forecasts and share recommendations, with John Stevenson at Peel Hunt even calling the shares uninvestable, after SuperGroup admitted to making an “arithmetic error” over its forecasts, as well as suffering issues with wholesale stock, and lower margins due to changes in the sales mix. More shoppers are buying its polos, dresses and T-shirts on the eBay clearance site or from cut-price outlet stores such as the one in Bicester, and this has eaten into margins. A pair of men’s cargo shorts can be had for £29.99 on eBay, compared with £44.99 on the Superdry website or in store.

The botched introduction of a new IT system at the company’s warehouses had already caused problems last year. New finance director Shaun Wills, who starts on Monday, will review SuperGroup’s financial controls, while Susanne Given, in the newly created post of chief operating officer, has been charged with sorting out operational problems.

Many analysts think Superdry can be revived. Jonathan Pritchard at Oriel Securities does not believe the brand is broken, operational cock-ups aside. “The new spring and summer ranges are a big improvement, but these are pretty austere times for the average 24-year-old, who is the heart of their brand,” he says. “The value for money and quality are very good.”

SuperGroup has just opened a new, three-storey flagship store on London’s Regent Street. Even critics say it looks great, with far less emphasis on branding in the new ranges and a bigger collection of accessories, but it is up against tough competition. Rivals Zara, Mango and Uniqlo all have stores nearby. Porter holds up Abercrombie & Fitch’s dark, minimalist store just up the road as an example of “how to do a hell of a lot out of not very much”.

Superdry owner in profit warning

Category : Business, World News

Shares in Supergroup, the company behind the fashion chain Superdry, plunge after the company issues its fourth profits warning in 12 months.

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Superdry roller-coaster loses some of its momentum

Category : Business

It’s too early to dismiss SuperGroup as a one-hit wonder – but fashion moves fast

The last three weeks of January, after the sale season mania faded, were a shocker for many high street retailers. Even so, you might have wagered that SuperGroup, after a decent Christmas, would defy the trend.

The Superdry brand may soon suffer from overexposure but surely, you might have supposed, there was enough momentum in the business to ride over a few January bumps.

It seems not. Like-for-like sales were down about 3% in the final three weeks of last month, a statistic that has ripped an 18% hole in the share price today. Same-store sales were still up 4.4% in the past quarter but the “variable” performance overall means profits for the year are expected to arrive near the bottom of the market’s £50m-£54m guess. In other words, it’s a mini profits warning to complement last year’s warning about warehouse problems.

Those punters who had bet it was safe to re-board the Superdry roller-coaster (floated at 500p in March 2010; £18 a year later; 450p last autumn) have had a shock. A good Christmas carried the price back to 700p, but today’s reading 580p. Superdry has become a store of surprises.

Its founder, Julian Dunkerton, remains cheerful. He points to January discounting by rivals such as Jack Wills and Hollister and says he is more positive about prospects for the next 12 months than he has been for a couple of years. He says an overhaul of the sourcing arrangements will deliver better-quality clothing at higher profit margins and lower prices for shoppers.

He may be right, but the real question is whether the Superdry brand, after a couple of sensational years, requires reinvention, rather than a mere freshening-up. It surely does. Even if there were special factors behind January’s weak sales, the moment is approaching when Japanese-themed logos lose their power to shift clobber.

The world always moves on, as FCUK knows. Burberry, further up the fashion ladder, showed how it can be done – it’s hard to spot the checks these days.

It’s too early to dismiss SuperGroup as a one-hit wonder – it’s a more substantial business than that – but fashion moves very fast, and SuperGroup must not be left behind.

Superdry warns of weaker profits

Category : Business, World News

Supergroup, the company behind the fashion chain Superdry, sees shares plunge after it scaled back its profit forecast.

Originally posted here: Superdry warns of weaker profits

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Vodafone rises as it calls off Greek merger, while Shire climbs on bid talk

Category : Business

Vodafone terminates plans to link up with Greece’s Wind Hellas; Shire subject of renewed speculation

Much of the recent interest in Vodafone‘s overseas businesses has revolved around India, but on Monday the focus switched to Greece.

In a short statement the mobile phone group announced it was abandoning plans – unveiled in August – to merge its Greek business with rival Wind Hellas. It said:

Vodafone and Largo, the sold shareholder of Wind Hellas, confirm they have agreed to terminate discussions relating to a potential business combination between Vodafone and Wind Hellas.

Analysts said competition concerns were probably behind the move, although Greece’s current financial problems could have played a part. Espirito Santo said:

The proposal to consolidate the Greek mobile market down to two players each with around 50% market share was never likely to succeed in any case, but it was probably worth a try; it was possible that an exception could have been made given the trauma that Greece in general and Wind in particular are going through.

We haven’t seen any official announcements regarding the reasons for the collapse of the merger from either the companies or the regulators, so we assume the regulators (Greek or EU) have told Vodafone in private discussions that this deal would not get approval. This allows Vodafone to withdraw without suffering the ignominy of public rejection.

We would now expect Vodafone to re-commit to growing its Greek business organically, which may involve some investment in subscriber growth/retention to grow its market share – a price worth paying in the short term to take advantage of Wind’s troubles.

Ahead of a trading update on Thursday Vodafone climbed 2.75p to 177.85p.

More generally, Greece was also the main subject on investors’ minds once more. With little clarity about the progress – or otherwise – of talks to allow the next €130bn tranche of bailout money to the paid to the country, the FTSE 100 suffered a little profit taking after hitting new six month highs last week. But there was no real sense of panic, and the index closed down just 8.87 points at 5892.20.

Shire rose 19p to £21.29 on renewed talk of a possible bid for the pharmaceuticals group. The company has been linked in the past with a number of predators, from Bayer to Pfizer to AstraZeneca. Traders heard suggestions this time of an offer worth perhaps £35 a share.

Still with takeover speculation, Misys climbed 5.5p to 335p hopes a bid would emerge following last week’s proposal for the IT group to merge with Swiss rival Temenos. The news disappointed those hoping for a bid premium for the UK business.

Randgold Resources was among the leading risers, up 165p at £75.65 after it reported a 259% jump in full year profits.

But Glencore lost 21.8p to 460.75p on suggestions it would have to pay more to succeed in its plans for a £50bn merger with Xstrata, down 21.5p at 1261.5p There were also reports the deal could face regulatory scrutiny.

A boardroom row at coal miner Bumi sent its shares 55p lower to 795p. Indonesia’s Bakrie family are attempting to oust financier Nathanial Rothschild and other directors from the board.

Anglo American fell 23p to £28.87 and BHP Billiton was down 6.5p at £22 on growing talk they could be about to pounce on US coal producer Walter Energy at around $125 a share. In the market Walter shares stand at around $75.

Insure Admiral gave up some of the gains it made on Friday, falling 39.5p to 998.5p. Andy Hughes at Exane BNP Paribas said:

Admiral’s share price reacted strongly on Friday (up 7.9%) to the announcement that the reinsurance arrangements had been extended to 2014 on current terms.

This prompted some commentators to say that Admiral’s reserving issues were in the past and that the reinsurers had audited the level of reserves. We see a key difference between the reinsurance and the shareholder risk. We do not believe the reinsurance structures will be effective in capital terms under Solvency II and therefore the extension is rather irrelevant.

We expect that Admiral’s market share is in decline. This could lead to a decline in vehicle count in the fourth quarter.

Elsewhere SuperGroup soared 41p to 703p after Oriel Securities moved from hold to buy, but Ocado dropped 4.8p to 103.5p on profit taking after last week’s share price rise.

Premier Foods has just started a £50m advertising push, with television spots starring Loyd Grossman plugging his sauces from today. The market seems unimpressed – Premier’s shares lost 1.5p to 10.5p.

But Character Group climbed 4.25p to 132.5 after the company signed a deal to produce a range of toys based on children’s social media and virtual world website Bin Weevils. The site won the best children’s website BAFTA in November ahead of the likes of Moshi Monsters and Club Penguin.

Amisha Chohan at Merchant Securities said:

[This] confirms the group’s ability to secure top licences, ensuring its product portfolio is broadening and up-to-date.

Avanti Communications dipped 1.5p to 284p as it announced a placing with new and existing investors to raise £75m. The cash will be used to fund the design, construction and launch Hyas 3, its third satellite which will sell capacity to telecoms companies and internet service providers.