Mixed news from Superdry as Christmas is strong but wholesale lag dents profits

By

Sandra Halliday

Published
Jan 27, 2023

Superdry reported “strong” Christmas trading on Friday but — like other festive season winners have done — also said it was “cautious” on the remainder of FY23. And the good news came with some bad as it scaled back its first-half profit forecast to “breakeven” on the back of weak wholesale and a slow Q1 in Europe.

While reporting its results for the 26 weeks to late October, it said that over the Christmas period, “demand continued to strengthen, with stores back to 2019 levels in December and retail revenue up 24.9%” in the nine weeks to 31 December.

That’s good news from a company that had struggled for some time and whose recovery had been doubted by many.

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As for the six months, the company said its brand recovery is “on track, with strong momentum for [the] AW22 collection and new leading categories”.

In the period, stores revenue was up 14.3% to £117.7 million as customers returned to high streets, with “strong demand for womenswear, denim, and jackets”.

NOW FOR THE BAD NEWS

It wasn't all good though and wholesale declined 5.2%, “due to a lagged recovery after Covid and shipment timing”.

And despite the overall good news on sales, the company said that “the return to a normalised cost base coupled with the slow start to Q1 in Europe, and the delayed recovery of wholesale have all impacted first-half profits”.

Its six-month adjusted loss before tax is £13.6 million and due to that “underperformance of wholesale and increasing uncertainty on Q4”, as mentioned, it has revised its outlook for FY23 profit on the same basis to be “broadly breakeven”. Previously it had expected profit between £10 million and £20 million.

Looking more closely at the H1 figures, the company said group revenue rose 3.6% to £287.2 million with a gross margin of 52.1%, down from 55.2%. That £13.6 million adjusted loss was compared to a £2.8 million loss in the previous year and the statutory loss before tax was £17.7 million, down from a £4 million profit a year earlier.

The 3.6% revenue rise was below the inflation figure. But on the plus side, retail channels grew 9.5% due to a strong return to physical retail, while e-commerce growth of 1.6% was more modest for the same reason. 

Yet they were offset by “both the slower rate of buy in wholesale, given some stock overhang, which continued to be adversely affected by stock overhangs from Covid”, and that “later dispatch profile” for AW22 product.

The gross margin drop was caused by “the strong delivery of our full-price stance during a period of rising costs being offset by delayed wholesale price increases and additional stock clearance through the wholesale channel”.

Despite the profit warning, founder and CEO Julian Dunkerton was upbeat and focused on the improvements. He said: “The Superdry brand has real momentum and I’m delighted by how our retail trading continues to strengthen against a difficult macroeconomic backdrop. 

“Our coats performed really well in the run up to Christmas, and womenswear continues to be a highlight for us. Stores continued to recover strongly and online had its biggest ever week over Black Friday, helped by our new e-commerce platform.”

However, he added that while the firm traded well through November and December, “we don’t expect market conditions to become easier any time soon, but with a new financing package in place and the brand in great health, we approach the year ahead with optimism”.

That optimism could be justified to a certain extent with the figures for Christmas trading showing how the firm’s performance improved throughout the year.

For instance, that aforementioned 24.9% retail improvement (combining both stores and e-commerce) for the Christmas period compared to a 15.7% equivalent increase for the 35-week year to date. Total group revenue in the shorter period was up 4.5%, but up a smaller 3.9% in the 35 weeks.