UPDATE 1-SuperGroup says results vindicate full-price strategy

Thu Feb 6, 2014 5:49am EST

* Firm did not discount before Christmas

* Q3 total sales 141.1 mln stg, up 22.1 pct

* Q3 retail sales up 18.2 pct, wholesale up 41.7 pct

* Says well placed to meet FY profit expectations

* Shares up 6.5 pct (Adds detail, CEO, analyst comment, shares)

By James Davey

LONDON, Feb 6 (Reuters) - SuperGroup, the British company behind the Superdry fashion brand, said strong third-quarter sales combined with profit-margin gains vindicated its strategy of not cutting prices before Christmas.

Rampant discounting dominated Christmas retail trade in the UK and there were few firms such as SuperGroup which publicly stated they would not engage in festive price-cutting, with Next another notable exception.

"The retailers that held their nerve and had a real focus on full price have had the best Christmas," SuperGroup Chief Executive Julian Dunkerton told Reuters on Thursday.

He said retailers that did discount heavily would regret it and have to learn lessons for 2014.

Debenhams and Marks & Spencer were prominent among store groups who cut prices sharply before Christmas.

Though official UK retail data published last month showed the sector recorded its fastest annual sales growth in more than nine years in December, Christmas trading updates from major store groups have shown mixed results.

SuperGroup, whose celebrity fans include singer Ed Sheeran and royal favourite Pippa Middleton, stood out as a winner.

Total sales of its trademark jackets, hooded tops, check shirts and jogging bottoms rose 22.1 percent to 141.1 million pounds ($230 million) in the 13 weeks to Jan. 26, taking the nine month total to 333.2 million pounds.

First-half gross margin gains of 50 basis points were maintained in the third quarter, leaving it well placed to meet market profit expectations for the full year.

Prior to the update, analysts' average forecast for 2013-14 pretax profit was 63 million pounds, up from 51.8 million pounds in 2012-13.

SuperGroup's shares have more than doubled over the last year as trading improved and management rebuilt credibility after a string of profit warnings in 2011 sent its shares plummeting.

The stock was up 6.5 percent at 1,589 pence at 1039 GMT, compared with a 0.7 percent rise in the FTSE All-Share index , valuing the business at 1.28 billion pounds.

Dunkerton - who started his business nearly three decades ago on a market stall in Cheltenham, south-west England, and floated it on the stock market in 2010 - said he was optimistic about growth prospects, with a focus on online and international opportunities.

"We feel very confident; the public all over the world are loving our product," he said.

The firm currently trades from 137 stores in the UK and Europe as well as 177 franchise stores globally.

"The company has spruced up and improved its ranges, which are helping to drive wholesale sales, particularly in Europe, and womenswear now has real momentum," said Cantor Fitzgerald analyst Freddie George.

SuperGroup's third-quarter retail sales rose 18.2 percent to 113.8 million pounds, with sales at stores open over a year up 1.3 percent - a ninth straight quarter of growth. Wholesale sales increased 41.7 percent to 27.3 million pounds. ($1 = 0.6133 British pounds) (Reporting by James Davey; Editing by Mark Potter and Pravin Char)

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