- Wholesale underperformance blights first half
- Demand strengthened over Christmas
- Full-year profit guidance cut
Shares in Superdry (SDRY) plunged 17% to 124p after the premium clothing and footwear brand lurched into loss for the first half and cut profit guidance for the year to April 2023 due to the underperformance of its wholesale business and ‘increasing uncertainty’ over the fourth quarter outlook.
Cheltenham-based Superdry now expects a ‘broadly breakeven’ result for the year, having previously guided to adjusted pre-tax profits in the £10 million to £20 million range, with management warning of the potential for ‘a soft Spring’.
LURCH INTO THE RED
Superdry swung from a £4 million profit to a statutory pre-tax loss of £17.7 million in the six months to 29 October 2022, pinning the blame on the return to a normalised cost base, slower October sales due to warmer weather and the delayed recovery of its wholesale business.
Revenue edged up 3.6% to £287.2 million, with retail sales growing 9.5% thanks to a strong return to brick and mortar retail while ecommerce growth of 1.6% was more modest.
Gross margins softened 3.2 percentage points to 52.1% due to rising costs, delayed wholesale price increases and the need to shift stock at a discount through wholesale partners.
Over the nine-week Christmas period to 31 December 2022, group revenue grew 4.5% year-on-year as physical store trading continued to recover offsetting a ‘material reduction’ in wholesale dispatches.
Retail revenue grew by 24.9%, reflecting a strong recovery in stores and cold weather which re-ignited demand for Superdry’s core outerwear.
‘Our coats performed really well in the run up to Christmas, and womenswear continues to be a highlight for us,’ said founder and chief executive Julian Dunkerton.
‘Stores continued to recover strongly and online had its biggest ever week over Black Friday, helped by our new ecommerce platform which is delivering real benefits.’
BROADLY BREAKEVEN
Dunkerton added: ‘Whilst we did trade well through November and December, the outlook for the remainder of the year is uncertain and as a result we are moderating our profit outlook to broadly breakeven.
‘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.’
THE LIBERUM VIEW
Liberum Capital argues Superdry’s shares are cheap, offering ‘significant long-term value’, and has a 500p price target for the stock. Nevertheless, the broker cut its full year 2023 forecast from a pre-tax profit of around £10 million to a £6 million loss.
Liberum said the key highlight of Superdry’s first half was an ‘outstanding Christmas’ where the Autumn/Winter 2022 collection ‘clearly drove a strong resurgence in retail revenues’.
However, ‘wholesale has lagged expectations leading to an unexpected first half loss and a downgrade to full year outturn expectations. That said, cash generation is good, new banking facilities are in place and aside from wholesale the rest of the business and strategy is well on track.’
