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Update on earnings SuperGroup and King Digital

Article By: ,  Financial Analyst
May 8, 2014 5:51 PM

Shares of SuperGroup, known for its Superdry brand, have taken a hammering (down 12% at time of writing) following the clothing retailer’s fourth quarter trading update.

While SuperGroup reported a 12.4% increase in group sales at around £98m for the quarter, by segment, its Retail business saw like-for-like sales (LFL) decline some 3% at £55m.

The decline in LFL sales was attributed partly to late Easter timing and a planned reduction in clearance sales on eBay. Adjusting for reduced eBay sales, LFL sales were down 1.3%.

For the full year, overall Retail sales came in at £285m – up 18% – with full year group revenue at £431m – a 20% increase.

SuperGroup, however, warned that its profit for the full year is set to be at the lower end of expectations.

For context, the lower end of pre-tax profit expectations come in at around £61m – that still represents a decent 16.9% increase over last year.

Still, the news sent the company’s shares down, bringing the total decline to around 32% from a peak reached in April.

Of course, recent negative news flow is likely to pressure the company’s shares, but a series of initiatives, including SuperGroup’s international expansion activities, point towards a return to growth in the long term.

 

King Digital

Shares of King Digital, which made its market debut in March, took a bit of a beating yesterday (7th May) after the company released its first quarter results.

King took $641m in gross bookings (total amount users pay for virtual items and access to skill tournaments), an increase of 1% on fourth quarter figures – but up from $422m in the same period last year.

Revenue also grew 1% compared to the previous quarter at $607m, but, it marked a 195% rise versus the first quarter in 2013.

The moderate growth in revenue and gross bookings, compared to the previous quarter, was predominantly thanks to its new game, Farm Heroes Saga.

That’s just as well, because its hit game Candy Crush Saga is on the decline, now accounting for 67% of King’s total gross bookings (it was 78% last quarter).

Meanwhile, profit came in at $127m. That represented a notable 20% drop from the previous quarter, but, it was up from $75m over the same period last year.

King attributes the decline in profit from the fourth quarter partly to increased marketing spend relating to the launch of Farm Heroes Saga.

The company’s shares declined around 13% following the update, and while it’s currently up some 4% today, it’s still trading around 18% below its IPO price.

The concerns surrounding King were highlighted here when it filed for its IPO in February – those concerns remain and that’s unlikely to help the company’s shares.

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