Fashion retailer Supergroup has today warned that its annual profits could be hit by as much as £9 million after a major glitch occurred during the implementation of a new warehouse management system earlier this year.
Although in the process of being resolved, some of the problems caused by the transition are still ongoing and the company has commissioned temporary warehouse facilities to address capacity requirements.
Supergroup, which owns the Superdry and Cult brands, admitted to supply chain problems in the spring, resulting in a slow roll-out of its full summer range during the unseasonably warm weather in April, but the latest warehouse woes were a direct result of a change to its systems at the end of August.
It is expected that the latest supply chain disruption will chop off at least £6 million in profits due to reduced sales and extra distribution costs, and Arden Partners Retail Analyst Nick Bubb called the situation “a warehouse and IT systems disaster”.
“This is very frustrating, as the share price had just begun to recover some of its poise at c1,000p, as the new autumn ranges gained traction,” he added.
“This amounts to a ten per cent downgrade (we are provisionally cutting from £70 million profit before tax to £62.5 million pro tem for year-end April 2012), which would put the shares on a P/E of around 17.5x at last night’s close.
“Unfortunately, they haven’t held that level today, as the market will be suspicious that the loss of sales isn’t just to do with stock shortage, as this period coincides with the recent hot weather and a weak high street.”
Supergroup’s changes to its Barnwood distribution facilities were made “to increase capacity and efficiency”, but for the short-term at least, they have achieved exactly the opposite.
Warehouse development is required as the business continues to grow its property portfolio by opening new stores across the UK, with eight new premises having already been unveiled since the start of its current financial year in May.
A statement from the retailer today said: “Whilst the issues outlined above are an unwelcome temporary set-back, these changes to our warehouse management systems are vital in supporting the significant growth we continue to experience in the business.
“Our strategy is unchanged and we have a high level of confidence in the group’s future growth prospects.”
Underlying profit before tax at Supergroup jumped £23.7 million to £50.2 million last year, driven by revenues of £237.9 million in the 52 weeks to May 1st 2011.