Shareholders should expect bumpy ride
SUPERGROUP was one of the few IPOs of 2010 that managed to live up to its boastful moniker. Merlin failed to inspire any magic and pulled its planned flotation; potential investors in New Look decided the shares were old rope; and while Promethean – titled after a wily Greek god – managed to get away, early investors are nursing big losses (although maybe its name is more appropriate: Prometheus also came to a sticky end) .
So shareholders who bought shares for £5 at SuperGroup’s IPO will have been feeling pretty smug in February, when the stock hit £18.99 – almost quadrupling their investment. Alas, it couldn’t last. Nagging doubts over the company’s optimistic growth projections, based on an ambitious store opening programme, have come home to roost.
Yesterday’s update, which was light on numbers, did little to soothe jittery nerves. Trading has been much better over the last three weeks, said management, leaving investors fretting about a below-par May.
The biggest worry is that consensus estimates rely on SuperGroup opening between 20 and 25 stores by the end of the year. We are not sure there are enough punters in austerity Britain willing to spend £75 on a hoodie to justify that rate of expansion. But even if there are, the retailer will open between just six and ten new shops in the first half of the year – leaving it an uphill task in the second half if it is going to hit its targets.
SuperGroup might not belong in the graveyard of 2010 IPOs, but we still think expectations are far too high.
Shareholders who disagree should expect a bumpy ride over the next six months.