Superdry still struggling as challenges continue, CFO to exit

Superdry announced its first-half results on Friday and as already flagged by the company, they weren’t great. The six months to 28 October saw what it called “challenging” conditions but “strong progress on cost and inventory reduction programmes”.

Most of the figures were in negative territory and even the profit it made in H1 was a result of one-off asset sales. 

And the picture is also fairly bleak for the 12 weeks since the first half ended. The company said group revenue for H1 so far is down 13.7%, with Retail down 10.2%. That divides into Stores down 10.4% and E-commerce down 10.1%. Meanwhile, Wholesale is down 38%.

“Milder weather and heavy discounting across the sector impacted Christmas trading and, consistent with our December update, we expect full-year results to reflect the more challenging environment seen to-date”, it explained.

The company also announced that its CFO, Shaun Wills, will step down at the end of March. Giles David has been appointed Interim CFO and will join the business later this month. The pair will “work together on an orderly transition over the next two months”.

Superdry said David “has a strong track record in consumer-facing businesses where he has operated successfully in turnaround environments, with previous roles at companies including McColls, Casual Dining Group and Wiggle”.

CEO Julian Dunkerton thanked and praised Wills, but the outgoing CFO admitted that “now is the right time for me to move on”. 

The news comes in the same week that another underperformer — Boohoo Group — also saw its finance chief being replaced.

The first-half numbers

Looking in detail at the figures for the first half, group revenue was down 23.5% year on year at £219.8 million, “impacted by the challenging consumer retail market, unseasonal weather, as well as the underperformance of our Wholesale segment”.

The gross margin rate improved to 54% from 52.1%, however. The company said this was largely driven by the changing channel mix and price inflation, but was offset by markdowns in order to clear old stock, a process that has been going on for some time at the business.

It made a statutory pre-tax profit of £3.3 million and while this was much better than the loss of £17.7 million a year earlier, this was due principally to the sale of intellectual property in the APAC region, offset partially by a non-cash impairment charge of £10.2 million. It had generated £36.3 million from the disposal of APAC brand rights.

Softer revenue hit underlying profitability and resulted in an adjusted loss before tax of £25.3 million, wider than the £13.6 million loss this time last year.

As for that H1 group revenue decline, it said that Retail was down 13.1% and Wholesale fell 41.1%. Meanwhile, e-sales were down 19.1%, partly due to the conditions out there but also by a “profit-focused reduction in spend on digital market marketing”.

The company said store sales performed more “robustly” but were still down 9.9%, affected by the wrong kind of weather at certain times during the season as well as the timing of promotions. 

As for that massive wholesale drop, the segment continues to lag its expectations and has been affected by declining volumes and structural changes within the broader market. But it’s also been hit by the company’s own strategy such as the decision to exit its US operations, brand rights sales and continued clearance activity.

It’s interesting that the Superdry report comes a day after another former high flyer in the British fashion sector – Dr Martens – also reported a massive plunge in wholesale turnover.

The company said it has made progress on its turnaround programme and its work to “rightsize our operating cost base [is] set to deliver in excess of £40 million in savings this financial year, ahead of our initially stated target of £35 million and with more than £20 million achieved in H1, as we continue to prioritise driving forward our cost reduction agenda”.

CEO Julian Dunkerton said of all this: “This has clearly been a difficult period. A challenging consumer retail market, against a backdrop of macroeconomic uncertainty and some remarkably unseasonal weather conditions have all combined to weaken the financial performance. These factors have been further exacerbated by the underperformance of our Wholesale segment.

“Whilst, to some extent, this was expected due to the decision to exit our US operations and the sale of the brand rights in non-core territories, the segment continues to prove challenging.

“Despite the near-term difficulties, we have made significant operational strides over the half year as part of our ongoing turnaround. Our cost savings programme remains on track and our inventory reduction programme is progressing well. We have also taken further action to support the balance sheet with a secondary lending facility and the agreement for a joint venture and disposal in South Asia, demonstrating the continuing attractiveness of the brand in foreign markets. 

“Christmas trading proved challenging, and we do not expect market conditions to get any easier in the near-term. However, I firmly believe we are taking the right steps for the business and the brand to return Superdry to profitability.”