Fashionretailer Supergroup (LSE:SGP) has delivered a strong set of results today and theyre especially stronggiven the problems besetting fashion retail at present. Revenues are up 21% and annual sales in its retail divisions increased 25%. On current form, Supergroup is a good house in a bad neighbourhood and todays results should help ease concerns that the retail sector is dying on its feet.
A key reason for the strong set of figuresboils to down to sound strategic planning and exploitation of opportunities online. The company had earlier planned major online expansion with more international e-stores, including a strategic move to open dedicated web stores in Taiwan and Australia. Additionally, the companys offline expansion plan to dedicate80% of planned future retail space (90,000 sq ft) overseas is coming to fruition, the firm having recently expanded into China via adeal with Trendy International Group, a casual fashion company backed by LVMH.
In e-commerce, the retailer now has 26 international websites across 18 countries in 12 different languages, which deliver to 169 countries. Wise investors Warren Buffett among the wisest always advocate that good management makes for good execution. The companys CEO, Euan Sutherland, clearly deservers huge praise for not only delivering on the strategic plan but also having the nous to take advantage of the momentum towards online shopping.
A new era
Income investors can add one additional stock to their buy list as Supergroup has paid its first dividend this quarter. Supergroups annual yield is currently 0.49% as the company takes a prudent approach to dividend payouts in the range of three to three-and-half-times earnings.
And rightly so, as Supergroup needs to adjust tobalancing its cashflow between dividend payouts and capital expenditure. Capex will beparamount to Supergroups continued success as its hoped that investment and expansion will lead to a higher rateof customer acquisitions and thus help bolstertop-line growth. Both Investment and expansion remain key factors for the CEO. He took the opportunity to reiterate hisvision by saying that our focus remains on the extension of the Superdry brand and execution of clear growth opportunities, underpinned by continued investment in infrastructure to strengthen our business.
What should encourage income investors is that should the UK retailer continue to churn out sound numbers as it did today, theres every possibility of a future yield increase. The City certainly seems to share this view as a 25% yield increase is predicted by 2017.
Yet its those investors seeking capital gains that may be eager to add this stock to their portfolios with hopes that this latest set of impressive results could be just the boost the stock requires to recover. Despite the current 12% gain in todays session the share price is still down 3.2%year-to-date.
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Yasin Ebrahim, CAIA, FRM has no position in any shares mentioned. The Motley Fool UK has recommended Supergroup. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.