A woman walks past a Superdry fashion store in Berlin, Germany, March 17, 2016. -Reuters
The founder of Superdry warned the revival of the struggling British fashion group would be a long haul after a 130 million pound ($161 million) charge for poorly performing stores pushed it into an annual loss, sending its shares lower.
Julian Dunkerton, the group's biggest shareholder with an 18.4% stake, won a bitter battle to rejoin the board in April prompting the existing directors to resign en masse. This 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 the 2019-20 financial year 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 in a statement. Analysts at Peel Hunt cut their current year forecast for pretax profit on an underlying basis by 10 million pounds to 46 million pounds.
"The key for us, is whether the new management team can stabilize demand for the core ranges and product lines," they said. The non-cash lease and impairment charges of 129.5 million pounds booked in the 2018-2019 accounts affect about half of Superdry's stores and reflect decreasing store revenues and the firm's cautious recovery plan. Dunkerton said the group was reviewing its store estate but did not anticipate a significant number of closures.
"The reality is landlords want us in their centers or on their high streets," he said. He said Superdry still saw big opportunities in the United States and China but would be reviewing how it operates in both markets.
British retailers are facing a perfect storm of rising costs, uncertainty in the economy around Britain's exit from the European Union and a structural shift online. On Tuesday an industry survey said sales at British retailers rose at their slowest average pace on record over the past year.
Superdry, which owns 248 stores across Britain, Europe and the United States, made a statutory pretax loss of 85.4 million pounds for the year to April 27 versus a profit of 65.3 million pounds in 2017-18. On an underlying basis, pretax profit slumped 57% to 41.9 million pounds - at the bottom of the range of analysts' forecasts that have been downgraded after the warnings. Group revenue was flat at 872 million pounds.
The numbers relate almost entirely to a period before Dunkerton returned to the business as interim chief executive. "Today's results clearly demonstrate why we need the changes we are putting in place to strengthen the business," Dunkerton told reporters.
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 issues in the business will not be resolved overnight," he said.
Superdry ended the year with cash of 35.9 million pounds, which it said supported the maintenance of its dividend policy. It proposed a final dividend of 2.2 pence, making a total of 11.5 pence. Dunkerton and Chairman Peter Williams dismissed a newspaper report of a rift between them. "I would not have taken this on if I didn't feel I could get on with Julian," Williams told reporters.
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