Superdry shares sold-off this morning after the company posted a 56.8% fall in underlying full-year profit before tax. Revenue was largely flat on the year and the retail environment was described as ‘difficult’. To make matters worse, the outlook for the fashion house doesn’t inspire confidence. The retail sector remains ‘highly competitive’, and the outlook continues to be ‘uncertain’. The firm has undergone major changes in terms of management in 2019, and the business issues ‘will not be resolved overnight’. Despite the poor performance, the group is confident it is doing the right thing to return to high profitability. The fact the dividend remains unchanged suggests the company is confident in its ability to turn itself around, as the dividend is usually the first to go when a firm is fearful about the future.
Superdry PLC (LON:SDRY) has had a rough ride recently as a string of profit warnings and a major management shake-up chipped away at investor confidence. Many in the retail sector have complained about a fragile consumer environment, and the problems that Superdry are having are making matters worse. A dreadful share price performance in 2018 prompted the founder, Julian Dunkerton, to get back involved in the company, after he stepped down from the board in the first-half of 2018.
In April 2019, Mr Dunkerton was readmitted to the board of directors and that triggered a mass resignation of directors. Since the return of the group’s founder, the Superdry share price has stabilised, but it remain under pressure.
In May, the group issued a profit warning – its third in one year. The fashion house had an underwhelming performance in the 13 weeks until late April as online and wholesale revenues dropped by 3.9% and 9.3% respectively. It is particularly disappointing that online sales are falling seeing as there has been a huge surge in online sales in recent years - that’s the reason high streets are struggling.
Superdry has introduced a few changes to try and buck the trend of the poor performance. It will ramp up the number of products available online, and it will cut back on the number of unnecessary discounts. Offering promotions has been a popular strategy across the entire retail sector, but more often than not it is the customer who wins, and not the shareholder.
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