Clothing brand Superdry said it expects annual profits to fall by up to 40 per cent because of warm weather, changing consumer behaviour and economic and political uncertainty, causing its shares to lose a third of their value.
For the financial year ending in April 2019, Superdry forecasts underlying profit before tax of between £55m and £70m, compared with £97m in the previous year.
The Cheltenham-based retailer said unseasonably warm weather in summer that carried on through to November and into December — Superdry’s two biggest trading months — has hit demand. About half of Superdry’s sales over the autumn-winter season come from hoodies and jackets.
As well as weather conditions, the company also said the “discount-driven consumer economy” was causing problems.
Superdry is implementing a new strategy that revolves around diversification away from outerwear. This includes a licensing scheme that will aim to deliver an additional £10m a year in royalties by 2022, and a move into childrenswear that was formally announced today.
Chief executive Euan Sutherland said the transformation programme would “address the current over-reliance on jackets and sweats”.
In recent weeks, Mr Sutherland has been criticised by Julian Dunkerton, the Superdry founder who left the business earlier this year but still owns 18 per cent of the shares. Mr Dunkerton said that today’s numbers “explain why I’m so upset”.
He said he told the board that switching the clothing range to four seasons from two would result in more discounting, and that cutting the number of items sold would reduce online growth.
However, chairman Peter Bamford rejected the criticism. “Julian’s views have not evolved with needs of a multichannel, international and increasingly digital business.” He added that since Mr Dunkerton’s departure from the company it had been more able to innovate and move into new product areas such as sports and snow wear.
Mr Sutherland said the company had discounted more than usual this year because of “legacy stock issues”.
“The previous mindset was not to do clearance sales and to have stock hiding away in store rooms instead,” he said. The warm weather had also resulted in more unsold inventory than usual, but Mr Sutherland said discounts offered — typically 20-25 per cent — were less than those of rivals. He added that the range reductions simply addressed “over-optioning” that resulted in small sales volumes for many lines.
Mr Dunkerton did not completely rule out bidding for the rest of the company, but said his intention was to lobby shareholders for management change. “You cannot stick with a strategy that has resulted in an 80 per cent share price decline in nine months.” He added that he remains open to rejoining the company “in any capacity”.
Michelle Wilson at Berenberg said management had provided “a very helpful and comprehensive review” of the strategy and recent problems and that there were “plenty of reasons for optimism” in the longer term. However, she added that it was hard to tell how long it would take to turn the brand around.
Analyst Kate Calvert at house broker Investec cut her profit forecast for the current financial year by 30 per cent and for the following year by 37 per cent. She also more than halved her target share price, from 1,500p to 600p. “It is no longer appropriate to value Superdry as a growth stock until sustainable growth is proven,” she wrote in a note to clients.
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