Shares in British fashion brand Superdry (SDRY) cheapened 3.6% to 431.5p as the Cheltenham-based retailer swung to a full year loss, slashed its dividend and issued a downbeat near-term outlook.

Founder and interim chief executive officer Julian Dunkerton (pictured below) pledged to return the retailer to its ‘design-led roots’ and get the retail basics right, yet he views 2020 as a ‘year of reset’, which suggests his daunting turnaround task has only just begun.

Superdry’s shares have taken a real hammering following a trio of profit warnings within the past year amid difficult industry conditions and with the brand losing its appeal to a traditionally board customer base.

READ MORE ABOUT SUPERDRY HERE

Capping off a difficult year, results for the 52 weeks ending 27 April 2019 revealed key metrics moving in the wrong direction. Total sales were down £300,000 to £871.7m with retail revenue in reverse, gross margins softened 2.5% to 55.6% due to discounting and underlying pre-tax profit slumped 56.8% to £41.9m.

Net cash halved to £35.8m and Superdry posted a statutory loss of £85.4m, versus a £65.3m prior year profit, struck after a £130m onerous lease and store impairment charge. The final dividend was cut to 2.2p, down 90% year-on-year, thus reducing the full year dividend from 31.2p to 11.5p.

Dunkerton, who returned to Superdry following a boardroom coup in April, said 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.

‘All the team in Superdry are working incredibly hard to deliver the direction set out, with a real focus on returning the business to its design-led roots and getting the retail basics right.’

2020 – A YEAR OF RESET

Superdry’s management expects group sales to show a slight decline in the current financial year (full year 2020), ‘particularly in the first half, as we rebalance promotional activity and strengthen the brand’.

And given competitive global retail markets and consumer uncertainty due to Brexit, as well as the lead times required to ‘rectify the product range and proposition’, management views 2020 ‘as a year of reset, creating a platform from which Superdry can return to long-term profitable growth.’ This year’s financial performance is expected to ‘reflect market conditions and the historic issues inherited’.

WHAT THE ANALYSTS ARE SAYING

‘There is no doubt these are a poor set of results for full year 2019,’ said broker Shore Capital. ‘The new management team are just three months in and still early days in attempting to stabilise the company. The UK consumer backdrop and retail climate are another headwind that the company needs to face in to. The reset will take time, and, in our view, it will be hard yards to regrow the earnings of the company back to historic levels.’

Russ Mould, investment director at AJ Bell, commented: ‘No-one was expecting Dunkerton to quickly revive Superdry but the market is clearly miffed that the guidance for the new financial year is declining revenue and for the financial performance to still reflect historical issues which have weighed on the group.

‘Before this announcement was made, the consensus analyst forecast for its new financial year was £896m revenue and £53.7m pre-tax profit. That now looks far too ambitious given Superdry made £871.7m revenue and £41.9m underlying pre-tax profit in the financial year just reported. Analysts and investors will need to reset their expectations.’


Issue Date: 10 Jul 2019