Deutsche Bank (DB) has initiated coverage on emblazoned-T-shirts peddler SuperGroup PLC (LON:SGP) while sitting firmly on the fence.
The shares are at an all-time high, and should not be chased higher at present, DB suggested, as it kicked off coverage with a ‘hold’ recommendation and 1,990p price target.
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The bank thinks the group’s Superdry fashion brand remains strong in the UK, and there a number of “self-help” (i.e. operational improvements) the group can make, but DB remains cautious on growth prospects in the USA and China, and the group’s shop economics.
“Our bespoke UK consumer survey addresses key investor concerns about the Superdry brand. Superdry shoppers rank it the most highly on quality, coolness and fashion,” wrote research analyst Warwick Okines.
“Non-Superdry shoppers, however, are averse to the brand's logo, and perceive it most negatively versus other branded peers. Combined with negative UK store LFLs [like-for-like sales], we are cautious about the brand's long-term potential,” Okines said.
DB believes that raising brand penetration is crucial, while self-help opportunities now need to yield benefits.
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Europe should drive sales growth over the next three years but as many UK retailers have learnt to their cost, growing profitably in the USA is a tough old business, and the same applies to China.