Superdry sees long road to recovery, denies new boardroom rift

London — The founder of Superdry warned the revival of the struggling British fashion group will be a long haul after a £130m charge for poorly performing stores pushed it into an annual loss, kicking its shares down.

Julian Dunkerton, the group’s biggest shareholder with an 18.4% stake, won an acrimonious battle to rejoin the board in April, prompting the existing directors, including CEO Euan Sutherland, to resign en masse.

He returned as interim CEO but there is uncertainty over how long he will stay in that post before shifting to a role in charge of product design.

Dunkerton and new chair Peter Williams on Wednesday dismissed a newspaper report of a rift between them over his tenure, saying they are working well together.

“We are aligned on the future,” Dunkerton told reporters, saying he is totally focused on turning the business around. The issues in the business will not be resolved overnight,” he said.

Williams said that while Superdry has hired a headhunter, a specification of requirements for the job is yet to be drawn up, let alone a candidates shortlist.

Dunkerton’s return followed a string of profit warnings as the retailer struggled to expand beyond its sweatshirts, hoodies and jackets with random Japanese text and as demand fell in its wholesale and ecommerce business.

Shares in the group fell as much as 11% on Wednesday, extending losses over the last year to 67%, after it forecast a slight decline in group revenue in 2019-20 and only a “modest” increase in profitability on an underlying basis, prompting analysts to cut forecasts again.

“We expect our financial performance [in 2019-20] to reflect market conditions and the historic issues inherited,” Superdry said.

Analysts at Peel Hunt cut their current year forecast for pretax profit on an underlying basis by £10m to £46m.

“The key for us, is whether the new management team can stabilise demand for the core ranges and product lines,” they said.

Huge potential

Dunkerton’s initial focus has been on getting Superdry’s product ranges right and improving its e-commerce proposition, where he sees “huge potential”. He has increased the number of products sold online, put more stock into flagship stores and cut back promotions to improve profit margins.

The noncash lease and impairment charges of £129.5m booked in the 2018-19 accounts affect about half of Superdry’s 248 stores in Britain, Europe and the US, and reflect decreasing store revenues and the company’s cautious recovery plan.

Dunkerton said the group is reviewing its store estate but anticipates only a small number of closures. “The reality is landlords want us in their centres or on their high streets,” he said.

He said Superdry still sees big opportunities in the US and China but will be reviewing how it operates in both markets, such as scaling back US warehousing space.

British retailers are facing a perfect storm of rising costs, uncertainty in the economy around Britain’s exit from the EU and a structural shift online.

An industry survey published on Tuesday shows sales at British retailers rose at their slowest average pace on record over the past year.

Superdry made a statutory pretax loss of £85.4 for the year to April 27 versus a profit of £65.3m in 2017-18.

On an underlying basis, pretax profit slumped 57% to £41.9m — at the bottom of the range of analysts’ forecasts that have been downgraded after the warnings. Group revenue was flat at £872m. The final dividend was 2.2 pence, down 90%.

The numbers relate almost entirely to the period before Dunkerton returned.

Reuters