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Finance error costs Supergroup

The once popular clothing retailer has some explaining to do, after maths lets them down
 Arithmetic error costs Supergroup
 
 

Supergroup has had to reassure consumers and shareholders today, following the announcement that an arithmetic failure has cost them dearly.

The immediate backlash to the news caused shares in the trendy fashion company to be sliced by a third, falling 31pc to 391.6pc. The calculation mishap is thought to have amounted to a sum in the region of £2.5 million.

It has been a dramatic fall from grace for Supergroup who had been taking the fashion world by storm until the back-end of 2011. Last February, the store’s expansion had culminated in a staggering share price of £18.20. However, signs that the wheels were coming off appeared as soon as October, later that year. A disappointing quarter of sales resulted in a profit warning in the lead up to the winter.

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Supergroup are now making something of a name for themselves as an accident prone chain, which has had a direct influence on the reduced shares seen over the last 24 hours. The October incident came as a consequence of an issue with a warehouse IT system upgrade that led to a severe stock shortage among their trademark brands.

On top of the £2.5 million hit that the former superpower has had to take, they have also announced that a further £2 million will have to be invested in operational costs. Overall, their expected pre-tax profits at April’s end of year stage is set to be around £43 million, falling well short of the current census forecast which sits at £50.74 million.

Supergroup have been quick to try and reassure the market that they have things in hand though:

"Retail sales are in line with expectations, however, the mix of sales through our various channels has impacted margins,” a statement said.

"Additionally, we took the decision to increase our operating costs in order to ensure that we had the correct product at the right time in each of our retail channels, and also, to accelerate investment in our management team."

Matthew McEachran, a Singer Capital Markets analyst, has less faith in the store following its “latest calamity” though.

"We had put faith in the growth story but are placing our estimates and recommendation under review after this latest issue," he declared.

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