Why Supergroup plc is my top retail pick

The changes in the retail sector in recent years have been dramatic. We’ve seen traditional retailers such as Marks and Spencer move from mainstream to trend-forward through ranges such as per una and its Alexa Chung collaboration. And retailers like Topshop and H&M that were once just mass-market fashion labels have grabbed more share as increasingly trend-conscious shoppers decided to spend a bit more on a stylish pair of jeans or a cool-looking jacket. After all, even the catwalk fashion brands like Tommy Hilfiger, Michael Kors and Calvin Klein are more affordable today via their diffusion lines.

SuperGroup has found the retail sweet spot

That’s why the sad news about BHS’s troubles isn’t entirely surprising. If you want to buy something cheap and cheerful, people purchase from Primark or the increasingly broad ranges sold by the supermarkets. BHS is part of the squeezed middle that’s losing out to other retailers. It’s rather similar to the difficulties faced by Tesco, Morrisons and Asda in the supermarket sector, and Ford and Vauxhall in automotive retail. People will often splash out that bit more on a BMW, or realise that cars made by Kia and Hyundai are just as good. If that’s the case, why buy a Ford or a Vauxhall?

And SuperGroup (LSE: SGP), the retailer behind the SuperDry brand, looks to have found the sweet spot. It sells attractive, sexy, casual clothes with designs that match the best from Ralph Lauren or Burberry, yet they’re so reasonably priced they compete for value with items from Marks and Spencer and Next.

And just as BMW and Waitrose are doing well, so SuperGroup is booming. A collaboration with actor Idris Elba shows just how cool this fashion label now is. Visit a store or browse the website and you’ll see rail after rail of gorgeous, upmarket clothes.

And its latest results are impressive

It’s latest, highly impressive results tell the story. Last year total sales rose by 21% to £589.5m, driven both by increasing like-for-like sales and a growing number of stores around the globe. You can now find SuperDry outlets all across of Europe, in the US and around Asia, and the programme of store openings is continuing. Profits for the year to April are expected to range between £72.5m and £74m. Investors have welcomed this news, and the share price has bounced by 13%.

The argument against SuperGroup has always been that this company will, at some point, go out of fashion. But if you have industry-leading designers that produce world-class products, you’ll always stay in fashion. Calvin Klein was selling clothes in the 1980s, and it’s still popular today.

So, if you’re looking for a consumer brand with substantial scope for growth in Britain and internationally, look no further than SuperGroup. It’s my top retail pick.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has recommended Supergroup. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.