JP Morgan Cazenove has initiated coverage on fashion firm SuperDry PLC (LON:SDRY), and the rating is ‘overweight’ – a bit like some of the brand’s fans.
The broker reckons the SuperDry brand has achieved global reach through a network of 605 retail outlets and 20 fully localised web sites.
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Just over a quarter of its revenue is generated online, and the group – known as Supergroup until a name change last month – has strong digital and social marketing strategies that, along with its omni-channel platform, “are real assets”, the blue-blooded broker said.
“SuperDry is already achieving similar cash profits per unit across channels and is among the few players not facing margin dilution from the shift of consumers to ecommerce,” Cazenove said.
“The group has, in our view, fully embraced the future of retailing and is well ahead of the curve in having ecommerce relevance, a modern and efficient omni-channel infrastructure and the skillset and capabilities required to communicate with consumers in store and online,” Caz added.
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The broker sees SuperDry’s focus on digital and its advanced use of technology as “key enablers to winning with digitally-enabled consumers”.
Looking at the finances, the broker expects SuperDry’s return on capital employed to improve from 25% in fiscal 2017 to 30% in fiscal 2020 and free cash flow to more than triple to £77.7mln in fiscal 2020, leaving room for cash to be returned to shareholders.
Caz has a price target of 2,710p for the stock, which currently trades at 1,778p.