Out-of-favour outerwear retailer Superdry (SDRY), best known for cold weather products including jackets and sweats, complains it has yet to enjoy a ‘sustained period of seasonally typical weather’ in its half year trading update.

Bombed-out shares in the branded clothing retailer and wholesaler edge 3p higher to 859.5p, although ongoing warm weather and the absence of second half guidance are enough to trigger material earnings downgrades this morning.

SLOWER GROWTH, & NO GUIDANCE

In the half to 27 October, year-on-year Global Brand revenue growth slowed to 6.4% amid the unseasonably hot weather conditions which largely caused a punishing profit warning from Superdry last month.

The company hasn’t provided any second half guidance, since warmer weather has continued since the profit warning and there remains no visibility on how it will trade over the peak winter and Christmas season.

BEMOANING THE WEATHER

Here’s the outlook statement in full: ‘While some of our key markets saw colder weather conditions last week, with the result that our sales performance in those markets was more typical for this time of year, we have not yet seen a sustained period of seasonally typical weather.

'As highlighted previously, the company’s full year profits are heavily influenced by its performance in the second half, led by cold weather products with jackets and sweats accounting for 55 to 60% of autumn winter sales.’

Analysts believe that without a sustained cold snap, there is scope for Superdry to miss previously re-based annual earnings estimates. Indeed, Liberum Capital slashes its full year pre-tax profit forecast by 25%, from £107.1m to £80.4m, to reflect the current warmer weather impact.

The brokerage also cautions ‘there could be further impact post peak depending on how much stock needs to be cleared’, via margin-crimping discounts, ‘but this remains uncertain as peak trading remains.’

RISKS REMAIN, DUNKERTON’S CAMPAIGN

Liberum adds: ‘Noise and questions from the founders will also likely continue, potentially distracting senior management but no doubt impacting the shares.’

Superdry shares have been absolutely clobbered in 2018, prompting co-founder Julian Dunkerton (pictured below) to mount a campaign to build shareholder support for a return to the fold.

You can read our interview with Dunkerton, where he sets out his plans to turn round the retailer, in the latest edition of Shares here.

On the defensive, incumbent CEO Euan Sutherland insists ‘Superdry has made significant progress in the first half. We are six months into a product diversification and innovation programme and, as we said in the summer, it will take up to 18 months for the benefits to come through.

'In the meantime we are well prepared for peak trading and the team remains highly focused on the delivery of sales growth and further efficiencies in the remainder of the year.'

However Kate Heseltine, analyst at Edison Investment Research, says ‘Julian Dunkerton, Superdry’s co-founder and largest shareholder, has recently made his views on the strategic direction of the business widely known and is rumoured to be getting investors on side to take back the reins.

'With that in mind, and as the weather has turned seasonably colder, much is riding on the performance in the second half, which accounts for 70-75% of full year profit.'


Issue Date: 08 Nov 2018