Superdry has difficult year as sales plunge

Superdry has filed it annual accounts for the period to the end of April and the picture they paint isn’t a pretty one. The company said group revenue fell 22% to £488.6 million, reflecting the continued underperformance of its Wholesale division but also impacted by softer conditions in its Retail segment.

In fact, Wholesale was down as much as 36% to £117 million, although the company said that to some extent this was expected due to strategic decisions it had taken. That said, the decline was also a symptom of the continued underperformance of the channel and the challenges it has faced in trying to restructure that segment to deliver growth.

While its Retail segment also declined, the downturn was less pronounced with ‘only’ a 16% fall to £371.6 million on lower store and e-commerce sales. E-commerce was down 18% year on year at £146 million and was impacted by the “well documented external and macroeconomic factors, but also by a profit-focused reduction in spend on digital marketing”.

Its stores performed more “robustly” than its other segments but were still down 14% at £225.6 million with the timing of promotions and the wrong kind of weather impacting its performance here. Both of its Retail channels were also affected by heavy discounting from competitors.

The company was careful not to call out the period as a successful one but said it did achieve “significant success” as far as steps taken to reduce costs are concerned. It has realised more than £40 million worth of savings within the year and this has resulted in significant reductions across its selling and distribution and central costs. The work to control costs continues.

Also on the plus side, the gross margin improved by 2.2% points to 55%, largely driven by the changing channel mix and price inflation, offset by markdown participation to clear older stock. But at least FY 24 net inventories of £79.6 million were down 29% year on year.

Not that we should get too carried away with the good news as the company was loss-making overall. The adjusted loss before tax widened from £21.7 million in the previous financial year to £48.3 million this time. As well as the generally softer conditions in Retail and Wholesale, a non-repeating foreign exchange gain of £10.6 million boosted the figures in the previous year, while increased finance costs also had an effect.

Other one-offs affected the business and resulted in a statutory loss before tax of £67.7 million, but at least this was better than the equivalent loss of more than £148 million in the previous year.

As for the outlook, the company said: “Despite the challenging market conditions, we are focused on enacting our restructuring and turnaround plan, leveraging our brand strength and enhancing our digital presence to secure our long-term future and return the business to profitability.
“On a medium-to-long term view, whilst recognising that there is a complex pathway in the interim to navigate, the group is targeting revenue of between £350 million and £400 million, a gross margin slightly ahead of current levels and mid-to-high single-digit EBITDA margin (on a pre-IFRS 16 basis).”

It continues “to anticipate volatility in the consumer retail market, influenced by global economic uncertainties and shifting consumer trends. We are mindful of these external and macro factors as we expect profitability to continue to be impacted by weaker trading. As a management team, we continue to focus on the delivery of our restructuring program and further opportunities to reduce the fixed cost base of the business.”