SuperGroup is in fashion

The clothing company has had a stellar performance over the past year, as the stock has more than doubled.

SuperGroup clothing
Source: Bloomberg

The company will announce its first-half numbers on 16 December, and traders are anticipating revenue of £255 million. That compares with the second-half revenue from last year of £278 million. The company will announce its full-year numbers in July 2016, and dealers are anticipating revenue of £565 million and adjusted net income of £54.9 million. These forecasts represent a 16.2% rise in revenue and a 14.8% jump in adjusted met income.

SuperGroup is making a comeback and it is over one year since Euan Sutherland was appointed as CEO, having taken over from the company’s founder Julian Dunkerton. Mr Sutherland was brought in to look after the commercial side of the business and make the brand more internationally known, while Mr Dunkerton will focus on the creative side of the company.

The firm went through a phase of issuing profit warnings in recent years, and the last one of which was in December 2014. Since then, the stock has risen 112% which is a clear indicator that Mr Sutherland’s plans are working.

Overseas expansion is on the rise and continental Europe is the target market and a joint venture with Trendy International is allowing the company to tap into China. In this financial year the company opened 14 new shops and the vast majority of them were outside its core base of the UK and Ireland.

Revenue is growing at a double digit rate and the retail revenue growth is outstripping that of the wholesale business. The firm is confident it will achieve its full-year target but Mr Sutherland stated the second-half would be more challenging. SuperGroup had a strong start to the year but a mild winter has put pressure on its profits in the past.

Equity analysts are bullish on SuperGroup, and out of the ten recommendations, eight are buys and two are holds. The average target price is £17.28, which is 7.9% above the current price. 

Technical analysis from Joshua Mahony MSTA, market analyst at IG

SuperGroup shares have run into significant trendline resistance in both November and December, with price selling off on both occasions. Interestingly, the second rally failed to regain the £16.90 level and instead is selling off once more. With price having broken through trendline support on Friday, there is a possibility that we could see a market top here. This would be dependent on whether price can close below £15.28.

A close below £15.28 would bring a bearish outlook, where £14.35 and £12.92 represent the next support levels in view. However, until that occurs, the uptrend remains in play and we could see another challenge of the £16.83 resistance level. 

SuperGroup daily chart

The weekly chart confirms this trendline resistance has substantial bearish connotations and thus there is a good possibility that a short-term double top may mark the beginning of a more substantial move lower. Thus where we go from here is going to have major consequences for the medium-term outlook in SuperGroup.

SuperGroup weekly chart

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