Management at fading fashion brand Superdry (SDRY) comes out fighting on Monday as the embattled board seeks to block the return of charismatic co-founder Julian Dunkerton (pictured below) to the struggling jackets and sweatshirts seller.
Currently led by chief executive officer (CEO) Euan Sutherland, the incumbent board insists its strategy is working – an optimistic assessment given the falling knife share price, off another 2p to 520p this morning – arguing Dunkerton’s return would have ‘damaging business impacts’ and that he has ‘no support’ from institutional shareholders in any event.
BOARDROOM BATTLE – THE BACKGROUND
Co-founders and significant shareholders Dunkerton and James Holder have requisitioned a general meeting of shareholders to press for the election of Dunkerton and Boohoo (BOO:AIM) chairman Peter Williams as directors, a meeting Superdry has duly scheduled for 2 April.
Dunkerton has seen the value of his stake shrivel following a slew of profit warnings and wants to correct what he insists is a fundamentally flawed strategy under Sutherland. Passionate ‘Remainer’ Dunkerton was CEO until 2014 before switching to the role of brand director.
He left Superdry completely in March 2018 in order to devote more time to other interests, but he has been angered by a change of strategy at the business he spent years building.
READ MORE ABOUT SUPERDRY HERE
Unsurprisingly, given the bitter public debate that has subsequently broken out between the parties, the Superdry board unanimously recommends shareholders vote down proposals for Dunkerton’s return, claiming it would be counter-productive, disruptive and trigger resignations.
In today’s statement, the board and management team insists they are ‘wholeheartedly and unanimously committed to the continuing delivery of the Global Digital Brand strategy (which has already yielded significant operational and strategic progress),’ – highly debatable given the downgrades that have clobbered the share price – ‘as well as the intensified transformation programme announced in December 2018.’
THINGS GET VERY PETTY
Then things begin to get rather petty, as both parties are laying the blame for the poor performance of Superdry’s ranges at each other’s door. Who are shareholders meant to believe?
Superdry insists it was Dunkerton, as the company’s Brand and Product Director (the role he wants to return to), who ‘had prime executive responsibility for the design direction, range selection and range build of the Autumn/Winter 2018 range, which contributed to the company’s underperformance in full year 2019, and which was representative of underlying issues in the approach to product and innovation.
‘Mr Dunkerton has failed to accept any responsibility for the Autumn/Winter 2018 range, even going as far as to claim that he had no involvement despite extensive and detailed evidence to the contrary.’
DAMAGING BUSINESS IMPACTS?
Superdry also argues that Dunkerton’s return to the fold in any capacity would be ‘extremely damaging to the company and its prospects’, going on to list numerous reasons why this would be the case.
Besides leading to ‘a strategy that would fail’, the board sees Dunkerton’s return re-introducing ‘a leadership style that does not fit within the open-minded collaborative culture, values and operation of the company’, leading to ‘dysfunctional relationships with the board and management’ with the potential to ‘damage morale across the business and cause departures of key personnel, including from within the board.’
Further down the statement, Sutherland and co claim institutional shareholders ‘have voiced strong support’ for the current strategy and management team and insist ‘none of them has indicated to the board any support for Mr Dunkerton’s return to the company.’ Back in November, as he was mounting his campaign to build shareholder support, Dunkerton informed Shares that he was getting very positive shareholder feedback for wrestling back control of Superdry.
In addition, the board cites a ‘lack of transparency with shareholders’ when it comes to the role Dunkerton is now seeking; while he is being nominated as a non-executive director, a role requiring approval from over half of shareholders, ‘he has confirmed to the board he wants an executive role responsible for product, brand and marketing (which would have required approval of at least 75% of the total voting rights of shareholders who are entitled to vote and do so).’
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, comments:
'The board of retailer Superdry has come out fighting against a resolution to appoint co-founder and former chief executive Julian Dunkerton and Boohoo chairman Peter Williams as directors.
'Dunkerton and fellow co-founder James Holder on 1 March requisitioned a shareholder meeting and the former’s desire to return to the fold has been in the public domain since last October.
'The situation looks like a classic power struggle. The incumbent directors don’t want to make any changes despite the business going through a very tough patch. And the old CEO hasn’t been able to let go of the business despite no longer working there.
'This isn't a tug of war match where the party with the strongest arm wins the day. It is a battle whose victor will be decided by shareholders as they are part owners of the business. They should vote for the party whose strategy makes best sense to put Superdry back on track.
'We're currently at the stage where this is a blame-game with both sides calling each other nasty names. The real test will come on 2 April when the vote takes place.'