Supergroup Profits Hit Due to Commercial Property Issue

Posted on 9 October, 2011 by MOVEHUT

Supergroup, who own Superdry, 77Breed and SurfCo California have seen share prices drop and profits threatened thanks to issues in their warehouse in Gloucester. The firm which has expanded rapidly even reported high profits in May of this year. So what has gone so badly wrong?

The issue involving their warehouse has resulted in the company having to reduce the levels of stock it can hold and the range of sizes it can distribute to commercial properties around the UK. A spokesperson for Supergroup expressed, “The total cost of this isolated event, including the additional temporary warehousing capability and resulting lost sales will impact the current year’s profitability by between £6m and £9m.”

Peter Bamford, Non-executive Chairman of Supergroup expressed, “We have reviewed all aspects of our infrastructure over the last year and agreed a number of investments and developments. In order to support our growth and run our business efficiently, improvements are required to our IT systems and to our merchandising, sourcing and supply chain processes.”

Supergroup have opened 21 new stores already this year. They had an annual target of 20 per year, which they have surpassed quickly. At the end of 2010 the company’s profits doubled to £65.1 million. It was only in May of this year that the company reported profits of £47.3 million. Individual commercial properties also saw an increase of four per cent per store. Speaking in January, Julian Dunkerton, Chief Executive stated, “This performance demonstrates the strength of our brand and the loyalty of our customers,” but how things have changed.

The hot weather that we all enjoyed last week probably did Supergroup no favours, as people were possibly more reluctant to visit retail commercial properties to buy winter coats in a mini heat wave. Frank Badillo, Economist for TNS Retail Forward agreed that the, “Warm weather no doubt explains part of the chill in September sales, but shoppers are also clearly telling us they want to hold the line on spending.” Less available disposable income could also have hindered the company’s profits, as people find cheaper alternatives, such as supermarket clothing like Asda’s George range.

Supergroup hopes to increase its stock levels by £2 million after they have sorted a temporary commercial property to hold stock. The company needs to be able to offer consumers the range of sizes that are expected in a high street commercial property, otherwise profits will no doubt continue to plummet.

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