Profits plummet at Superdry but fashion brand is fighting Covid-19

SuperdryJulian Dunkerton

Revenues dropped by more than 19 per cent to £704.4 million at Cheltenham-born global fashion brand Superdry, thanks to the devastating impact of Covid-19 on retail as the sector was forced to shut up shop wholesale for three months from 22 March.

But it wasn’t just the current pandemic that has impacted Superdry, it was also the impact of the company’s drive to move away from persistent discounting, and as a result of the new strategy, sales of the company’s full price rose.

The company’s statutory loss before tax widened from £89.3 million to £166.9 million after its revised trading outlook caused a store impairment charge of £136.9 million.

Superdry has negotiated short term rent deferrals and accelerated lease renewals on its store estate, achieving on average around 43 per cent reductions on the 49 leases agreed to date.

Julian Dunkerton, Founder and Chief Executive Officer, said: “Our priority throughout the pandemic has been the wellbeing of our colleagues and customers. As with all retailers, we have experienced significant disruption to our operations, and this has inevitably had an impact on our FY20 results, but I’m proud of how everyone in the business has stepped up during this exceptional time.

‘While our underlying profit has been impacted by trading performance during the year, including Covid-19 related store closures, I am particularly pleased by how strongly Ecommerce has performed, with FY21 first quarter revenues nearly doubling year-on-year. This has been complemented by our increased digital consumer engagement, which helped drive a stronger womenswear mix than we have ever seen before.

“I’m pleased that we have delivered a good increase in the full price mix, which is up +12pts year-on-year and has had a positive impact on gross margin.

“We are delivering on the reset of the business, despite the impacts of the pandemic. This has included re-invigorating the store design and layout, preparing for a relaunch of our website, and significantly increasing the number of options available both in store and online.

“Above all, I am very excited about our new AW20 [Superdry’s new designs based on American vintage fashion] collection which will be almost fully ranged by the end of October and is the first full collection I’ve overseen since my return to the business last year. It reflects our new brand philosophy and a return to Superdry’s design-led roots, which encompass a commitment to sustainability.”

However, the retailer has also boosted its focus on sustainability, with nearly a fifth of all its products being made from organic cotton this year, and all of its owned stores and offices converted to renewable electricity.

Earlier this year it also announced that it had exited its joint venture agreement with Trendy International in China and had taken back control of the Superdry brand in China.

It said that trading continues to be disrupted, but has improved from the end of FY20 as social distancing measures are relaxed and consumer demand gradually returns.

The company said that adopting a flexible trading stance, it has discounted more in recent months compared to the prior year to help clear excess stock which accumulated during the temporary store closures resulting from Covid-19. 

Stores in Europe began to reopen from the start of May, with the region performing comparatively better over the year to date (-32 per cent year-on-year) than the UK (-55 per cent ) and the US (-75 per cent ), which saw later openings and still have a small number of stores closed (predominantly airport locations and specific US cities).

The weekly sales on reopening in each region were stronger than initially expected, stabilising through July and early August at around (30)-(40) per cent , with the run-rate improving again in the most recent weeks.

Continuing the trend highlighted at its 7 May update, Ecommerce continued to performing strongly in the first quarter, even as physical stores reopened.

Wholesale performance has been ahead of initial expectations, but still down materially year-on-year with Superdry partners facing the same headwinds as the retailer’s owned stores. However, it has reconfirmed the majority of the AW20 forward order book, and have seen cash collections ahead of budget. Wholesale performance is currently 36 per cent down year-on-year, with monthly phasing likely to remain volatile.

Despite a stronger than anticipated performance in Q1, historically our lowest trading period, we remain cautious on the shape of the economic recovery, and the impact this may have on our ability to turnaround performance in line with our Plan. Consequently, we recognise there is a material uncertainty (relating to our covenant tests – see going concern assessment for further details), and are not providing formal guidance.