19th Dec 2023 11:25
(Alliance News) - Superdry PLC's latest profit warning sent its shares to a record low on Tuesday, with analysts suggesting this could attract acquisition interest from bargain-hunters.
The Cheltenham, Gloucestershire-headquartered clothing retailer warned its profit for its current financial year ending at the end of April will suffer amid the "well-documented challenging trading environment".
Superdry pointed to an "abnormally mild autumn" which resulted in a delayed uptake of its Autumn/Winter 23 collection.
Retail fell 13% year-on-year in the 26 weeks to October 28, as Wholesale plunged 41%, which it said was partly due to its US wholesale operation exit.
"Despite progress on strategic priorities and ongoing programme to recapitalise the balance sheet, the external environment has proven challenging and trading performance has been significantly below management expectations. Profits for the year are therefore expected to reflect this weaker trading seen to date," the firm warned.
Shares in Superdry plunged 15% to 35.35 pence each in London on Tuesday morning, having fallen to a 12-month low of 28.15p earlier in the day.
"It's hard to believe that this time six years ago the shares traded around GBP20. This business has not simply faced more competition, it has truly lost its way," said AJ Bell investment director Russ Mould.
"The true test of whether Superdry is now a basket case would be if Frasers takes a stake in the business. The Sports Direct owner likes to make equity investments when rivals are in the gutter and Superdry certainly has enough wounds to qualify. Frasers rarely wants to buy a business outright, but it does like to build decent stakes so it can have influence on strategy and strike favourable distribution deals," Mould mused.
Mike Ashley's Frasers Group PLC is known for its acquisitive nature, having recently snapped up stakes in companies including Currys PLC, boohoo Group PLC, AO World PLC and Asos PLC.
"While Frasers is not currently on the shareholder register, it must surely be a matter of time if Superdry continues in its current direction. A selection of Superdry t-shirts and hoodies with Japanese writing are already being sold in Sports Direct and one could imagine the brand having a bigger presence in the future," Mould continued.
Superdry said that recently, the more seasonal weather in the UK and Europe helped sales edge up again, but added that sales in the six weeks since the half year were still 7% lower on a like-for-like basis than a year prior.
In the eyes of Shore Capital, the update could point to wider trends within the UK apparel space over the key festive period.
"We suspect that whilst real living standards are now on the rise in the UK, shoppers are being careful, prioritising groceries, beverages, and holidays over many other product categories," the investment firm said.
Shore notes that brands are proving resilient, with Marks & Spencer Group PLC, Next PLC, and Associated British Food PLC's Primark appearing to gaining share over the wider market.
"The Superdry warning adds a little tension into the air ahead of the forthcoming New Year trading updates from clothing players. Following on from a quite mellow Black Friday time when UK volumes were at best flat, shopper behaviour in December seems to be quite late in committing to spending," the investment firm said.
"Next kicks off the New Year trading season on January 4 and we would be surprised to see any disappointment from this name, but the Superdry warning suggests that it and others need to gain share to deliver another nudge up to forecasts."
By Elizabeth Winter, Alliance News deputy news editor
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