SuperGroup’s warehouse malfunction, which could hit profits by as much as £9m, demonstrates the risks of rapid store expansion, according to broker Espirito Santo.

The retailer said full-year profits would suffer following the problem, which hindered stock delivery to store.

Espirito Santo analyst Sanjay Vidyarthi said: “This highlights one of our key concerns regarding the risks of such rapid growth and that visibility on how and when things go wrong is low.”

The retailer said it suffered a “significant, temporary reduction both in the amount of stock and range of sizes reaching its UK stores” during the implementation of a systems upgrade at its premises in Barnwood, Gloucestershire.

Peel Hunt analyst John Stevenson has cut his pre-tax profit forecast to £62m from £70m as a result. He said: “New ranges appear to have gone down well with customers, phasing has improved and the business was getting back onto the front foot. However, such stellar growth has proved to be too much for the level of systems and business change.”

Supergroup said: “While the issues outlined above are an unwelcome temporary set-back, these changes to our warehouse management systems are vital in supporting the significant growth we continue to experience in the business.”

The malfunction is SuperGroup’s second stocking issue in 2011 following its struggle to get summer stock into store early enough in its fourth quarter.

SuperGroup’s international and wholesale business was not affected by the latest glitch, although there are plans to roll out the systems overseas.

The retailer estimates that the total cost of the error, including the additional temporary warehouse facilities and resulting lost sales, will be between £6m and £9m.

While temporary extra warehouse facilities are now in place, stock levels are not yet back to normal and the issue is not expected to be resolved until next month.

SuperGroup has been expanding aggressively, with plans to open 20 stores a year.

It has more than 60 trading currently.

Topics