Superdry PLC (LON:SDRY) has been downgraded to ‘sector perform’ from ‘outperform’ by RBC Capital Markets after the recent share price rally does not justify its valuation.
According to RBC's analysts, Superdry is pursuing broadly the right recovery strategy for the brand, but the execution risk is higher than average, though they raised the target price to 300p from 200p.
READ: Superdry pins hopes on online Black Friday sales amid forced closures
The fashion retailer renewed its focus on full-price sales, a better product offering and increasing customer engagement alongside a sustainability offer, including organic cotton, recycling and renewable electricity.
Although it has introduced a more segmented, targeted range, the Canadian bank reckons it will continue to be challenging to appeal to different age groups.
On the wholesale side of the business, sales have also been significantly impacted by the pandemic, they said but should recover as franchise stores reopen and consumer demand returns.
Online sales now represent 40%of total retail sales and strengthened through the second quarter, driven by strong own-site sales, helped by stronger autumn/winter ranges but also the clearance of aged stock, which will continue to impact retail gross margin in the second half.
Superdry has boosted its social media presence and is driving more personalisation and engagement around its brand and new collections, the analysts added.
Shares shed 4% to 270.72p on Monday morning.