Investec hails reassuring update from Supergroup

4th Sep 2014 11:33

Investec has repeated its 'buy' recommendation for Supergroup, saying that better-than-expected first-quarter results from the fashion retailer should "reassure" investors."We continue to believe the valuation does not reflect the brand's longer-term growth potential in the UK and internationally," the broker said.Management had flagged that first-quarter retail like-for-like (LFL) sales would be negative due to tough comparatives, but the 3.7% decline was not as bad as the 4% drop Investec had pencilled in.Meanwhile, an update on second-quarter trading indicated that LFL trends had turned positive with LFL sales over the first 18 weeks of the year combined down just 1%.Investec analyst Kate Calvert said: "This implies +6% for the later five weeks (unweighted) as the new season ranges came in, the industry generally benefitted from the colder snap, and competitive pressures eased. Womenswear participation has also increased, which is encouraging after the weaker spring/summer collection.""While we would not extrapolate the +6%, this performance helps underpins our second-half positive LFL expectations as the comparables weaken materially," she said.Calvert said that sales momentum is "on the right trajectory" and the group should achieve her full-year profit before tax forecast of £72.3m (consensus: £70.3m).However, the third quarter which covers Christmas will be key for the full-year performance, given that it accounts for around 40% of annual retail sales, she said.The stock had surged 10.8% to 1,159p by 10:28.BC