Despite an 8.4 per cent hike in sales, £19.8 million rise in costs hit underlying pretax profits by 31.6 per cent at Super Group, a marketer of apparel in the first fiscal half ended October 25, 2014.
Super Group which markets the Superdry clothing brand said driven by growth across all its trading channels, H1 sales rose to £208.2 million, up £16.1 million or 8.4 per cent on the year.
However, £19.8 million increase in costs, drove down underlying operating profit to £12.1 million, down 31.6 per cent in the period from the prior year.
Operating profit margin in the reporting period too sank 340 basis points to 5.8 per cent as against the first half of last fiscal year.
According to Super Group, the hike in costs was largely attributable to space growth, the primary driver of store costs, the European business acquisitions, and the increase in head office costs.
Warehouse and distribution costs benefited from the planned efficiency gains of 20 per cent in the second quarter from the new distribution centre.
And although with stock levels and throughput remaining higher than planned, total distribution costs grew ahead of sales.
The high proportion of fixed and semi-fixed costs meant that it was not possible to leverage the cost base in the short term, but the management said, it will try to deliver efficiencies in the second half.
Like-for-like sales dropped 4.1 per cent from the first half of the previous fiscal year, but full-price internet sales mounted 15.9 per cent.
Gross profit at £122.8 million was up by 12.5 per cent on the prior year first half and gross margins were 59.0 per cent, up 220 basis points.
“This has been driven by improvements in both retail and wholesale margins due to lower clearance activity, business acquisitions, and the growing mix of international business,” Super Group said.
Super Group's store count increased to 151 during the period, as during the first half-year, it expanded its owned store count by 12 and retail space by 7 per cent from 633,000 to 679,000 square feet.
Four stores were opened or acquired in UK, Germany and Scandinavia, and stores were also opened in France, Belgium, Austria and Spain with four closures.
“The Group remains on track to deliver its full year guidance of between 80,000 and 100,000 square feet of owned incremental selling space,” the apparel marketer informed.
Newly appointed CEO, Euan Sutherland said, "Super Group during this period suffered from widely publicised external factors. I have identified that there are some parts of our operations that we can improve.”
“I am reviewing every aspect of the business, including the execution of our strategy, cost management and capital allocation and will report our conclusions in spring,” he added.
Sounding optimistic he said, "We are well prepared for the important peak season and remain on track to deliver profits within guidance."(AR)
