Margin dispute hits high-flying shares of Superdry's owner

SuperGroup, whose flagship brand is worn by celebrities including Leonardo DiCaprio and David Beckham and which has been one of Britain's most successful flotations this year, saw its shares dive 20 per cent before closing down 11 per cent, or 178p, at 1,450p. That compares with a flotation price of 500p a share in March.

Chief executive Julian Dunkerton unnerved the market when he said rises in raw material prices, particularly cotton, might hit gross margins in the financial year 2011-12. Margins would return to more normal levels in 2012-13, he assured.

In reference to higher cotton prices, Dunkerton said: "Our growth is nothing short of spectacular, it's a tiny blip. There is a bit of a blip in autumn (2011]."

He added: "It's literally a few point off margin, it's nothing really significant and our (sales] growth is so significant I don't expect it to be any worry. I'm certainly not losing any sleep over it."

The chief executive said he would not pass on raw material price rises to consumers on all products. There are certain price points that I don't want to change. There are certain products that we are adding a (price] competition element that will actually maintain or reduce prices in certain categories even though they're cotton."

However, analysts said a change in the group's accounting policy meant underlying gross profit was 1.5 million lower than reported. They said the change affected gross margin calculations and led to uncertainty over costs such as "inward freight and duty costs", which were previously considered immaterial.

It came as SuperGroup, which has a strong teenage and twenty-something following, revealed that pre-tax profits leapt 86 per cent to 14.6m in the six months to end-October. That compared with 7.8m in the same six months of 2009.

The company's retail sales jumped 71.7 per cent to 54.4m, while wholesale revenues, which are now made in 43 countries, surged 56 per cent to 36m.

SuperGroup said the autumn/winter collection had proved popular in the UK and overseas, and its owned and franchised retail expansion was progressing well. Its wholesale spring/summer order book was strong, the firm added.

The company ended its first half with 55 standalone Superdry and Cult stores along with 69 concessions. It also has 53 franchise and licensee stores in 15 countries.

Dunkerton said plans to develop 400 franchised outlets in core European markets over the next five to ten years was "very achievable".He said the group was in talks to enter the Russian and Indian markets.