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Jul 10, 2019
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Superdry swings to loss in transitional phase, expects eventual stronger future

Jul 10, 2019

Superdry’s results are under close scrutiny even in normal circumstances. But at the moment, with the company having been under huge pressure and co-founder Julian Dunkerton returning to the helm, its sales and earnings reports are even more in the spotlight.


It said on Wednesday that in the year to April April 27 (FY19), total group revenue was flat at just under £872m, and the gross margin fell to 55.6% from 58.1%. Underlying pre-tax profit plunged to £41.9m from £97m and the statutory pre-tax loss was £85.4m. It had made a profit of £65.3m in the previous year.

The Retail division’s revenue fell 2.2% to £536.7m with a 3.7% fall in owned store revenue to £373m but a 1.6% rise in e-tail to £163.7m. Like-for-like (LFL) store sales fell 9.6%.

Performance in its largest market, the UK/Ireland, was weak with revenues down 8.2%, driven by continued negative LFL performance in stores, as well as a significant slowdown in e-commerce revenues in H2.

Revenues in Europe grew 4.7%, with growth in France and Germany offsetting relative weakness in smaller EU markets. And North America saw strong growth in store revenues, benefitting from new stores that offset LFL declines in that market.  However, e-commerce weakness was a drag on this performance, impacted by a significantly reduced range offering as it “transitioned to in-market fulfilment.”

Its Wholesale division, which includes traditional wholesale as well as its franchised and licensed stores in secondary catchments and developing markets,   saw revenue of £335m that was up 3.6%. Performance in its Key Accounts (major/multiple retailers) was flat however, with growth in the US and Europe offsetting declines in the UK.


Clearly, they weren't the kind of figures that the once-high-flying retailer likes to post. So what actually happened last year?

“In a difficult retail climate, [the] first half performance benefited from discounting and space growth followed by poor performance in the second half across all channels,” it said.

But, of course, it’s hard to tell just how things will pan out as it’s essentially a changed company today, under new management, with a radically different strategy since Dunkerton returned a few months ago.

And the company emphasised this on Wednesday, saying that it's now “focusing on design-led roots and creating a solid platform for long term profitable growth through bringing back design excellence, and creating clearer customer segmentation; re-igniting the brand DNA through consumer engagement and social media; resetting store profitability, [with] support for wholesale and a growth plan for e-commerce; [and] building a cohesive team to stabilise the business.”

Dunkerton added that “the issues in the business will not be resolved overnight. My first priority on returning to Superdry has been to steady the ship and get the culture of the business back to the one which drove its original success.”


He said he and his other co-founder James Holder “have reversed the previous buyer-led approach to return to being a design-led business; we have re-engaged Super Design Lab and our exceptional internal creative teams; we are returning to the quality of product for which the brand previously became famous; we are producing a continuous flow of innovative, brand-enhancing product and capsule collections. Critically, we are enhancing and supporting the business by reducing lead times, and producing cutting edge, commercial branded product.”


The important question is whether this is starting to have an impact. Dunkerton said it is. “Our initiatives are gaining some early traction, and I am confident we are doing the right things to ensure that over time Superdry will return to strong profitable growth,” he said.

Chairman Peter Williams added that the results were undeniably disappointing but he continues to believe that the company has a strong future, despite the fact that “global retail markets are expected to remain highly competitive and the consumer outlook continues to be uncertain, including the continued uncertainty of the impact of Brexit.”

As mentioned, FY20 is a transitional period for the company (or “a year of reset,” as Williams said) and so we’re unlikely to see huge improvements quickly. “We expect our financial performance in FY20 to reflect market conditions and the historic issues inherited,” Williams explained.

There are early, “albeit small positive results from new initiatives across the retail channel,” but Superdry expects group revenue to show “a slight decline in FY20, particularly in the first half, as we rebalance promotional activity and strengthen the brand.” But it added that the “stronger full-price trading stance in retail will support gross margin rate gains, partially offset by the dilutive impact of channel mix towards wholesale.”

As well as the overall reinvention of the brand, the company said that this year will see it focusing more heavily on the key e-tail growth channel with a redesigned website and releasing stock that had been stuck in warehouses to its webstore. It has been achieving full-price sales on this extra stock.

And talking of price, it has a laser focus on selling as much product at full price as possible. To help this, it’s aiming to boost demand and this year will be increasing investment behind the brand and marketing activities so will be “increasing the marketing team headcount and experience.”

It also said: “We recognise the opportunity social media offers a brand like Superdry and therefore we are already making changes to bring social media activity back in-house to enable us to reduce costs and reinvest this to significantly improve our social influence on line.”

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