- Tie-up to accelerate growth in India
- Superdry to receive £28.3 million
- Funds to give turnaround a fighting chance
Long-suffering Superdry (SDRY) shareholders were given something to cheer about after the struggling fashion retailer secured itself some breathing space by signing a joint venture deal with India’s biggest retailer, Reliance Brands.
Superdry and Reliance will own 24% and 76% respectively of a joint venture that will include the Cheltenham-headquartered clothing brand’s intellectual property (IP) assets in India, Sri Lanka, and Bangladesh.
Shares in the hard-pressed hoodies, jackets and sweatshirts seller rallied 25% to 54p on the news, as the tie-up not only provides Superdry with cash to help fund a highly uncertain turnaround but also reignites the brand’s international growth ambitions.
WHY THE DEAL MAKES SENSE
Steered by charismatic founder and CEO Julian Dunkerton, Superdry is selling its South Asian IP to Reliance Brands, already the fashion retailer’s partner in India, for £40 million in a deal that will see Superdry receive roughly £28.3 million net of fees and taxes.
Superdry believes the tie-up with Reliance provides ‘the best opportunities for the future growth of the Superdry brand’ in these territories and will allow the company to focus on growing its brand and increasing sales in its more established territories.
Since partnering with Reliance back in 2012, the Superdry brand has expanded rapidly in India.
‘Considering the backdrop of a growing Indian economy, a growing population of affluent shoppers, and ever-increasing apparel consumption rates, the Superdry brand in the market has attractive potential,’ insisted Superdry in today’s well-received statement.
SALES GROWTH SPICE
As India’s leading fashion retail operator, Reliance Brands is ‘best placed, through a majority IP ownership stake, to maximise the opportunity’, added Superdry, whilst pointing out the South Asian IP spoke for a mere 1.8% of its total sales in the year to 30 April 2023, contributing revenue of £11 million and pre-tax profits of about £2.6 million.
Superdry expects to receive total proceeds of approximately £28.3 million net of transaction costs and taxation, which will be used to strengthen the balance sheet, boost liquidity, and fund the retailer’s ongoing working capital requirements as part of Dunkerton’s turnaround plan.
Shares in Superdry, whose recovery prospects have been hurt by the cost-of-living crisis, plunged to an all-time low in September after it reported a ‘tough’ start to its new financial year blighted by extreme weather across the UK and Europe and ‘challenging and unpredictable’ retail market conditions.
The retailer also warned investors not to expect ‘significant revenue growth’ in the current financial year as management focuses on cutting costs and enhancing margins.
Delayed annual results showed a lurch to statutory pre-tax losses of £148.1 million from a £22.4 million pre-tax profit a year earlier, struck after adjustments including store asset write-downs.
