February 7, 2019 / 7:21 AM / 5 months ago

Superdry's declining sales raise pressure on management

LONDON (Reuters) - British fashion group Superdry, whose strategy has been criticised by the company founder, reported lower revenue in the Christmas quarter, blaming issues with its product range and mild weather.

FILE PHOTO: Shoppers walk past an advertisement for Superdry displayed on its store on Regents Street in London, Britain December 15, 2018. REUTERS/Simon Dawson/File Photo

Superdry, whose main products are sweatshirts, hoodies and jackets, has issued a string of profit warnings, the latest in December, and its shares have slumped 70 percent over the last year.

The stock fell as much as 4.2 percent in early trading on Thursday, before recovering.

Superdry’s management, led by Chief Executive Euan Sutherland, is under fire from Julian Dunkerton, the company’s founder and former CEO who left the business last March but still owns 18.4 percent of the equity.

Dunkerton, who quit because he could not “put his name to the strategy”, wants to return to Superdry’s board and has raised the prospect of convening a shareholders’ meeting to facilitate that.

He does not agree with Superdry’s product and internet strategy and has the support of co-founder James Holder, who owns 9.7 percent of the shares.

Last April Superdry launched an 18-month product innovation and diversification programme, aiming to reduce its over-reliance on cold weather clothing by entering new areas such as clothing for children. On Thursday it reported “early progress” with that plan.

Group revenue in the third quarter to Jan. 26 was 269.3 million pounds ($347.4 million) down from 273.3 million pounds in the same period last year.

That reflected an 8.5 percent fall in store sales and a 0.7 percent decline in online sales, partly offset by a 12.7 percent rise in wholesale sales.

Other fashion retailers such as Next and Ted Baker fared better over Christmas.

Superdry said its performance, although subdued, fell within the guidance issued in December.

Prior to its update the consensus of analysts’ underlying pretax profit forecasts was 58.4 million pounds for the year to April 27, 2019, down from 97 million pounds made in 2017-18.

“We continued to be impacted by the ongoing product mix and relevance issues we have previously highlighted and by the lack, until the end of quarter three and the start of quarter four, of any prolonged period of cold weather in our key markets,” said Sutherland.

Superdry shares were flat at 510 pence at 0912 GMT, valuing the business at 417 million pounds.

RBC Europe analyst Piral Dadhania said Superdry’s product offer lacks breadth, whilst its lead times are too long.

“Its brand positioning remains unclear, with too broad a target demographic, whilst its narrow reliance on winter focused products makes it susceptible to weather trends more than peers.”

Reporting by James Davey; Editing by Kate Holton/Keith Weir

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