SuperGroup invests in IT for new period of growth

Revenue at Superdry owner SuperGroup jumped 21.4% to £92.1 million in the first half of the company's financial year, but the business is looking to maintain this momentum by investing in new systems and supply chain operations to prepare itself for future progression.

In a trading statement for the 26 weeks to 27 October 2013, the group said that its system replacement projects are presently on track and within budget, and will support the retailer's medium- and long-term growth plans. 

Its merchandise management system has now entered the user acceptance testing phase and the business has put plans in place to commence staff training once the Christmas peak trading period is over. The company also revealed that the rollout of the store infrastructure for merchandising stock management has now been completed and a phased approach to cutover will take place over four weeks from the end of February.

Other systems updates have seen the initial development of a BT Expedite point of sale system, which is currently in testing mode, and the roll-out of a new HR system in August that is expected to help drive scheduling efficiencies in store operations. Meanwhile, CODA has been selected for the retailer's finance system, with the first phase of this tool set to be unveiled at the start of the next financial year.

Capital expenditure on tangible fixed assets in the period was £14.6 million, principally attributable to the investment in new store openings and store refurbishment (£9.4 million), but IT systems development and leasehold improvements over the half-year cost £0.8 million and £0.6 million respectively. This inevitably had an impact on the bottom line, with reported operating profit down 29.7% year on year to £9.7 million.

But the retail world is evolving quickly, and businesses need to invest as they move towards omnichannel retailing. Commenting on SuperGroup's infrastructure development, Ray Buckler, project director at consultancy Retail DNA, said: "The systems they are putting in place should underpin the brand by delivering the 'one view' of the key aspects of the business – products, stock, customers and orders.

"Without the ability to have this real time database, providing essential retailing information and available to store staff, web team, warehouse and purchasing, any retailer hoping to make it in this decade will fail."

From a distribution perspective, SuperGroup capital expenditure on fit-out costs at its new Burton-on-Trent distribution centre totalled £3.5 million for the 26-week period. The process was completed on budget and ahead of schedule, with the formal handover of the site to the group completed on 15 November.  

The retailer acknowledged that the site is still very much in transition mode, with the warehouse currently employing 59 people while the company's two Gloucester-based warehouses continue to supply full-price stores and internet orders over Christmas. These two legacy sites will close in the first few months of 2014, as full operations are switched to the Burton facility.

With the introduction of click & collect in the first half of the financial year aligned with other eCommerce development, SuperGroup is clearly putting significant focus on fulfilment and its multichannel offering – and the new distribution centre will support this strategy.

Brian Hume, managing director of retail training and consultancy firm Martec International, said: "Click & collect is a relatively new service for SuperGroup and should help business in the UK significantly. 

"Martec's annual IT in Retail survey of the leading 150 UK retailers indicates that click & collect will be at least 40% of online sales in just a few years. As SuperGroup expands internationally, it will need to consider how it can offer a click & collect option in countries where it has only a few or no company owned stores."

For the half-year, total internet sales were up by 18.7% compared to the same period in 2012, but the growth in internet business from Europe was particularly notable with a strong sales upturn in Germany, the Netherlands and France. Indeed, total eCommerce sales from overseas were greater than UK sales for the first time, which CEO Julian Dunkerton said represented an important milestone as the business looks to demonstrates its credentials as a global organisation.

The business now has stores in 41 countries and operates 17 country- or language- specific websites, having added new sites in the US and China earlier in this financial year. Websites in Australia, Taiwan and South Korea are planned to go live during the second half of the financial year, while the recent introduction of a virtual fitting room and improved zoom on product images for the UK site shows the company is keen to keep standards high in its home territory.

"Going international through a mixture of channels including online, distributors, franchisees and own stores spreads the risk and in markets like Germany strengthens SuperGroup's probability of long term success," explained Hume.

"It also means that the company can try a new market or country without having to risk significant capital initially, until its lower investment channels demonstrate that the Superdry brand will be well received. The growth of online sales also serves as a good indicator of where to locate stores as the business expands, because the online data will show where the biggest clusters of customers originate from."

The plan for the company as 2014 arrives is to continue raising awareness of the brand on an international scale, while at the same time maintaining revenue growth and modernising internal systems.

Retail like-for-like growth in the first half of the financial year was 8.1%, compared to 3.1% one year before, and profit before tax for this part of the business was £11.4 million. With improvements made to womenswear and a continued solid performance from its menswear ranges, the retailer is confident about future progress.

Buckler said: "They are making the right moves in the online and offline routes to market to further develop the brand – it's astounding to think that Superdry is only a decade old from conception.

"Being in the desirable and trendy destination retail spaces; Liverpool, Bath, London, etc – and not only in the UK – asserts its place at the head table in fashion retailing. The website in over 17 languages supplying to 100 countries also shows a confident retailing operation."