Superdry Struggling To Stay in the Game
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A poor fourth quarter has resulted in another profit warning from casualwear-brand Superdry and one analyst describes the embattled label as “struggling to remain relevant”.
Amy Higginbotham, a retail analyst at GlobalData, the data and analytics company, said a poor fourth quarter has exacerbated Superdry’s woes and dragged down overall performance for the year.
The company, reeling from a mass exodus of board members and senior executives in the wake of co-founder Julian Dunkerton’s return to an active role in the business, now expects its underlying profit before tax for the full year to be about 50 per cent down on last year’s £97 million.
With the board distracted by the disruption caused by Dunkerton and his eventual return, Superdry’s group revenue dropped 4.5 per cent in the fourth quarter.
“This was driven by a particularly poor performance in its wholesale and online divisions, which the retailer attributed to an increased volume of product returns and a reduction in promotional activity,” said Higginbotham.
Group revenue remained flat at £871.7 million, while growth in wholesale and online revenues slowed significantly, and store sales dropped £14.4 million to £373 million.
“He also plans to introduce 500 new products within the next six months, though the details of what these products are exactly remains unclear.””
“The lack of detail regarding Dunkerton’s long term plans to turn the retailer’s fortunes around is not very reassuring, and investors will no doubt be eagerly awaiting a more detailed update in July with the publication of the retailer’s full-year results,” said Higginbotham.
“Initial changes made by Dunkerton on his return have included reducing promotions to improve margins and supporting sales with more stock in flagship stores. He also plans to introduce 500 new products within the next six months, though the details of what these products are exactly remains unclear.”
But she says Superdry will have to do a lot more if it is to regain its relevance amid tough competition from the likes of JD Sports and boohoo.com, which have much stronger brand appeal – and Superdry must be clear about which demographic it wishes to target.
“Dunkerton has indicated that he does not intend to go ahead with the previous management’s plans to enter childrenswear, and will instead focus on targeting teenagers, though this will require the retailer to justify its high price points, which could be done using brand exclusives and celebrity endorsements.
“The outlook for Superdry remains challenging. Though a new executive team will take Superdry in a much-needed new direction and eventually provide more stability, the board still lacks a clear strategy to turn the retailer’s fortunes around, and any new initiatives will take time to bear fruit.”
Questions & Answers
Q.What was Superdry's expected underlying profit before tax for the full year compared to last year?
What was Superdry's expected underlying profit before tax for the full year compared to last year?
The company expects its underlying profit before tax for the full year to be about 50 per cent down on last year's £97 million. This reflects a significant drop in profitability.
Q.Which divisions were primarily responsible for the group revenue drop in the fourth quarter?
Which divisions were primarily responsible for the group revenue drop in the fourth quarter?
The drop was driven by a particularly poor performance in its wholesale and online divisions. The retailer attributed this to an increased volume of product returns and reduced promotional activity.
Q.What are some initial changes Julian Dunkerton has made since returning to an active role?
What are some initial changes Julian Dunkerton has made since returning to an active role?
Dunkerton has reduced promotions to improve margins and supported sales with more stock in flagship stores. He also plans to introduce 500 new products within the next six months.
Q.Which demographic does Julian Dunkerton intend to target for Superdry?
Which demographic does Julian Dunkerton intend to target for Superdry?
Dunkerton plans to target teenagers, shifting away from previous management's plans for childrenswear. However, the retailer will need to justify its high price points for this demographic.
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