Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Superdry struggles to lift store sales amid high street downturn

Sales at SuperDry stores dropped 2.3% as high street retailers come under pressure from falling footfall
Superdry
Superdry is about six months into a product diversification programme

SuperDry PLC (LON:SDRY) reported a 3.1% increase in half-year revenue even as it struggled to lift store sales amid a difficult retail market. 

The company said total revenue rose to £414.6mln in the 26 weeks to 27 October from £402.0mln last year.

But sales at SuperDry stores dropped 2.3% to £177.4mln, underlining the struggles facing high street retailers as more consumers opt to shop online.

The poor sales performance at stores was offset by growth in the wholesale and online businesses. Wholesale sales increased 7.8% to £171.8mln and e-commerce sales grew 6.9% to £65.4mln.

Global brand revenue, excluding China, gained 6.4% to £831.8mln.

READ: SuperDry co-founder could return to the company - media reports

SuperDry is about six months into a product diversification programme, which involves reducing its reliance on heavier weight winter clothing like jackets and sweatshirts and selling more dresses, skirts, women’s tops and denim, as well as expanding into premium, sports and licensed goods.

Chief executive Euan Sutherland said the programme would take up to 18 months for the benefits to show but in the meantime the company was “well prepared” for peak trading over the Christmas period and remained "highly focused on the delivery of sales growth and further efficiencies in the remainder of the year”.

Warm weather hits sales of winter products 

SuperDry, however, suggested that warmer than usual weather over Autumn had affected sales.

“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,” the group said.

“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." 

In October, the company warned that unusually warm weather and the effect of foreign exchange costs would have a £10mln negative impact on full-year profit, prompting co-founder Julian Dunkerton to threaten to return to the retailer to help halt its decline.

Dunkerton left the brand to focus on his other businesses in March after he “felt a change of strategy” at SuperDry and “didn’t want to be part of that”. However, he told the Sunday Times that he “just can’t sit back and watch 30 years of my life be gently eroded.”

SuperDry's sales have also been affected by the troubles at House of Fraser, where it has concessions.

Analysts weigh in on SuperDry's performance

"Although the UK heatwave and House of Fraser were blamed for the retailer’s comparatively poor performance, its growth has been slowing year-on-year signalling a longer-term issue beyond these factors," said Emily Salter, retail analyst at GlobalData.

"The retailer’s prices are at the higher end of the midmarket which may alienate many potential customers, especially as many trend-led clothing retailers now sell athleisure and sports clothing at lower prices including H&M, ASOS and Topshop. Given the increased competition, Superdry is less able to capitalise on the health and fitness trend and sales are slowing as a result."

Liberum reiterated a 'hold' rating on the stock and cut its earnings and sales forecasts, saying it sees better value elsewhere. 

For the 2019 financial year, the broker lowered its sales estimate to £911.6mln from £958.6mln and its pre-tax profit forecast to £80.4mln from £107.1mln. 

"With earnings momentum negative, we favour stocks like NEXT (HOLD) that trade on 12x, offer, c.5% earnings per share growth and a secure 3% yield."

Shares fell 1.5% to 843p in morning trading. 

View full SDRY profile View Profile

SuperDry Timeline

Related Articles

Flying Brands
July 17 2018
“We look forward to the future with confidence and excitement," said Flying Brands boss Trevor Brown.
H&T Pawnbrokers store
July 02 2018
Last year the company saw gross profits jump 45% thanks to a booming personal loan book and robust sales of luxury second-hand watches and jewellery.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use