7th Oct 2022 17:56
(Alliance News) - Superdry PLC shares surged on Friday as the clothing firm reported it swung to an annual profit, recovering as it saw the full re-opening of its store estate after the lifting of Covid-19 restrictions.
Victoria Scholar, head of investment at interactive investor commented that the swing to profitability would come "welcome reprieve" for investors in Superdry who have been "suffering with a near 60% slide in the share price even after today's bounce."
Shares in Superdry closed up 11% at 113.60 pence on Friday in London. Over the past year, however, the stock has fallen around 53%.
In the financial year that ended April 30, Superdry swung to a pretax profit of GBP17.9 million from a loss of GBP36.7 million a year prior. Revenue grew 9.6% to GBP609.6 million from GBP556.1 million.
Scholar said this was a "symbolically and fundamentally important moment" for the firm but cautioned that it is "yet to be seen" whether Superdry can maintain this positive earnings growth amid "growing macro headwinds".
In its preliminary results, the firm admitted it remains "cautious" about its outlook and the impact of inflation.
"Increasing cost inflation, exacerbated by the conflict in Ukraine, is likely to put pressure on operating margins across each of our territories," it explained.
Nonetheless, the company's gross margin improved by 350 basis points year-on-year to 56.2% thanks to its full-price strategy - something analysts at Liberum said was a "clear sign of brand health".
Corroborating Superdry's concerns, Scholar looked to the future with trepidation: "It looks like this will be a difficult year for retail with consumer discretionary set to struggle amid a slowing UK economy and a weakening consumer. The pandemic online shopping boom has ended, and high street sales are unlikely to plug that hole."
This, she added, wouldn't be helped by the challenges of cost inflation, which has been exacerbated by the strength of the US dollar and weakness for sterling.
Liberum, meanwhile, offered a more positive outlook: "the foundations [of Superdry] have been fixed and the very tangible progress in the group's three pillars (product, social and ESG) support an exciting outlook."
In this context, Liberum said, Superdry shares continue to look "extremely cheap". As a result, the investment bank placed Superdry at 'buy'.
By Heather Rydings; heatherrydings@alliancenews.com
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