Executive Summary

• Supergroup reported 1H17 revenue growth of +31.1% year over year to £334.0 million, in line with the consensus estimate. New retail space contributed 15.0% to total sales growth. Retail comparable store sales increased 12.8% year over year in 1H17.
• 1H17 gross margin is expected to contract by 130bps, mainly reflecting a greater share of lower-margin wholesale revenues, as well as the dilutive impact from targeted clearance activity. The channel mix impact will contribute to about 80-90bps of gross margin erosion.
• The company expects 1H17 profit to fall in the range of £20-22 million, suggesting 9% year-over-year growth at the range midpoint, and FY17 profit to be in line with market expectations of £84.6 million. In 2H17, the company expects small gross margin accretion after some initial headwinds from input cost inflation. If this is delivered, this would suggest FY17 gross margin erosion of 40-60bps.