14th Apr 2023 12:02
(Alliance News) - Some analysts believe the writing may be on the wall for Superdry PLC, with its latest update providing evidence of its growing irrelevance among Britain's cash-strapped consumers.
The Cheltenham, England-based clothing retailer, said it withdrew its existing guidance of "broadly breakeven" adjusted pretax profit in the year ending April 30, compared to a profit of GBP21.9 million in financial 2022.
Shares in Superdry plunged 16% to 89.88 pence each in London on Friday. They are down around 49% in the past 12 months.
Superdry said retail sales in February and March were below its expectations, despite showing "significant" year-on-year growth.
"This can partly be attributed to factors outside the company's control, including the cost-of-living crisis having a significant impact on spending and footfall, and poor weather resulting in less demand for our new spring-summer collection," Superdry explained.
According to AJ Bell's Russ Mould, the withdrawal of guidance and report of weak sales shows the brand is "really struggling" in an environment with increasingly cost-conscious consumers.
"Blaming the weather for poor performance is never something likely to endear a business to investors and yet Superdry reaches for this excuse as it seeks to explain a downturn in sales in February and March," Mould added.
Superdry said it has identified over GBP35 million in initial cost savings, which have been "externally validated". These entail optimising its estate, savings on logistics and distribution and better procurement.
It also plans to narrow its product range as part of its cost saving efforts.
"Reducing costs will help in the short term but reducing the number of clothing ranges could diminish its appeal further. Closing shops is also sensible but suggests things are only going one way. Its destiny could be the same as the likes of Joules and Cath Kidston, with the brand owned by a third party and its high street presence being diminished or disappearing entirely," Mould warned.
Last month, Next acquired the Cath Kidston vintage clothing brand in a GBP8.5 million deal. In December, Next had bought a 74% stake in UK lifestyles retailer Joules Group PLC for GBP34 million
Hargreaves Lansdown's Sophie Lund Yates said Superdry is "walking down the right path" with its cost-savings goals.
"But cost savings can only carry you so far. At some point organic demand needs to carry the mantle," she continued.
Superdry expects revenue of between GBP615 million and GBP635 million, up at least 0.9% from GBP609.6 million a year prior, but the guidance is unlikely to inspire confidence.
"Today's update is only likely to fuel the argument that the brand is just no longer as relevant as it once was, with fewer people prepared to pay a premium for its faux-Japanese stylings," Mould concluded.
By Elizabeth Winter, Alliance News senior markets reporter
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