28th Dec 2022 14:22
(Alliance News) - Superdry PLC on Thursday last week reported that half-year revenue rose, despite "extremely challenging" conditions", and that it had secured a new three-year lending facility and a new auditor.
For analysts at Liberum, last week's update provided reassurance at "three key levels".
The clothing retailer said revenue in the six months that ended October 29 was up 3.6% from a year earlier, driven by strong performance in its owned stores.
Superdry said store revenue increased by 14% as clothing collections resonated well with customers, while e-commerce revenue was up just 1.7% as traffic moved from online back to stores. Jacket sales and its Autumn-Winter 2022 performance from third-party sites also were key drivers of growth, Superdry said.
"It's been well documented that conditions are extremely challenging which weren't helped by the unseasonably warm weather in October and into November. However, by combining great product with affordable prices, we managed to grow sales in the first half," said Founder & Chief Executive Officer Julian Dunkerton.
Wholesale revenue was down 5.2%, meanwhile, which Superdry said followed low levels of dispatches in October. The firm expects this to partially reverse in the second half of its financial 2023.
The drop in wholesale revenue wasn't a major concern for analysts at Liberum, who explained that wholesale tends to lag retail performance by a year.
"With management planning to give wholesale performance a much closer look next year, we expect the improvement in retail to reflect in an improved wholesale performance in [financial year 2024] and beyond," they said.
Superdry also announced last week that it had secured a new three-year facility of up to GBP80 million with specialist lender Bantry Bay Capital Ltd, which will expire in December 2025. This includes a GBP30 million term loan and has an extension option of one further year.
It will replace its existing asset-based lending facility of up to GBP70 million, which was due to expire at the end of January.
Liberum said this new facility was "operationally less complex" to manage and gives Superdry more flexibility to continue moving in the "right direction they have been heading in for two years".
"The facility is also very covenant light with tests that, if pushed, would open up a dialogue with Bantry Bay instead of any punitive actions that could give investors any concern," the investment bank noted.
The Superdry board appointed new auditors, RSM UK Audit, for financial 2023. Liberum analysts said this reassured, as the auditor is well-recognised.
Liberum dubbed the moves as "three big steps forward" for Superdry.
However, Liberum nonetheless adjusted its forecasts for Superdry down to reflect higher interests costs and weaker wholesale trading.
It lowered its estimate for adjusted profit before tax in financial 2023 to GBP10.4 million from GBP16.2 million. This is towards the bottom of the Superdry's own guidance range of between GBP10 million to GBP20 million for adjusted pretax profit.
This change in estimate was driven by the higher GBP2.5 million interest costs associated with Superdry's new facility, Liberum explained, as well as weaker intake margin in the Wholesale division.
"We have followed through the [profit before tax] downgrade into the next two financial years, driven mainly by the full-year impact of higher interest costs as well as some prudence around the consumer demand environment," Liberum added.
Despite this, Liberum said that Superdry's shares remain "too cheap" and placed the retailer at 'buy' with a price target of 500.0 pence.
Shares in the Superdry were up 4.1% at 122.20 pence on Wednesday afternoon in London. In the year-to-date, the stock is down 54%.
By Heather Rydings, Alliance News senior economics reporter
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