Supergroup has been in the financial news over the last week for all the wrong reasons.
Owner of the uber-cool Superdry brand, beloved of numerous celebrities, Supergroup has grown at a phenomenal rate.
Superdry has hardly been out of the pages of Heat magazine and is frequently seen in music videos. You can’t walk down a high street anywhere in the UK without bumping into someone emblazoned with the distinctive logo.
Since the launch of the brand in 2004 it has been a roaring success. In 2007 David Beckham wore one of their jackets, which not surprisingly, gave them massive exposure.
This early success encouraged the owners to raise capital, via a floatation in March 2010 at 500p per share. In February 2011 they moved into Europe via franchises. It is now present in 91 countries. By any measure this has been an astronomical growth rate.
We all know that fashion retail is a very fickle business and Superdry has succeeded where others have failed in creating a loyal customer base. The designs have remained fresh and their clothes have continued to be very popular.
However, behind the scenes this growth has caused real problems that the board do not seem to have been able to resolve. Julian Dunkerton, the Chief Executive, has admitted that there have been weaknesses in the financial controls leading to four profit warnings, the latest one coming last week which stated that the profits for the year to 29th April will be £43m, instead of the previous forecast of £50m. It transpires that this was caused by someone inputting a ‘+’ instead of a ‘-‘. This latest profit warning has resulted in the share price falling by a third.
It would appear that as the business has grown the board has not focused enough time and energy on ensuring that the management team was capable of controlling such a fast growing business.
Although the financial management of the business has now been bolstered, the damage has been done and it will take sometime to regain the faith of the markets and investors. One analyst has been quoted as saying that this latest problem “is one too many”.
The lesson I draw from this is that you must build the right infrastructure to support your business now and for the foreseeable future. I have seen many businesses where the management team has not ‘grown’ with the business, or where the business owner has retained Accountants or Solicitors out of sentimentality.
An inadequate management team will have a detrimental effect on performance, so under-investment in this area is a false economy!