Julian Dunkerton, chief executive of fashion retailer SuperGroup, has played down the impact of rising cotton prices after its shares plummeted by about 15% on Wednesday despite posting an 86.4% hike in pre-tax profits to £14.6m for the first half of the year.
The company, which operates apparel chains Superdry and Cult, said in a trading update this week that increases in raw material costs could impact gross margins in the next financial year and result in some price hikes.
However, Dunkerton remained upbeat: “It’s a complete overreaction to what we said about cotton prices. We are better placed than anyone else in the [young fashion] market. We are seeing massive growth compared to the rest of the sector. Internet sales are going through the roof and at the start of the year we predicted 20 new stores this year and it’s going to be 25.”
He said the increase in cotton prices would be offset by working with new suppliers and “various tweaking” to its pricing, with some product prices expected to rise by up to 10%.
“Some products will see a 10% increase, some will see 5% and some will stay the same,” said Dunkerton.
Oriel Securities analyst Jonathan Pritchard said the update was “predictably excellent” but added: “The comments regarding gross margins next year did concern us.”
Pritchard said it was “unlikely that the shares’ stellar performance will continue unabated”. He moved his “long-standing buy recommendation back to hold”.
He added: “The negative share price reaction reflects the emergence of the first clouds we have seen on the Superdry horizon. We still believe this is a great brand and a strong management team.”
Retail sales at the company’s Superdry and Cult stores increased 72% to £54.4m, reflecting the retailer’s expansion from 42 stores to 55 stores during the period.
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