“This has been a difficult year for the business,” said Superdry’s Julian Dunkerton as the delayed full-year numbers finally appeared. He could say the same about every year since his against-the-odds coup in 2019 when he succeeded in getting himself reinstalled as boss of the company he co-founded in 2003 and brought to the stock market in 2010.
First, he ran into the pandemic, then the cost of living crisis and then a long financing struggle that is reflected in the pauper’s terms on the group’s £25m borrowing agreement from Hilco: 10.5% plus the Bank of England base rate, so an overall interest rate of 15.75% currently.
The consolation is that Superdry hasn’t yet had to draw on the Hilco facility, designed to manage the working capital swings in the fashion game. Yet in the past six months the group has also had to raise £11m of fresh equity and flog the brand rights for a large chunk of Asia-Pacific for $50m (£39.6m).
It looks uphill work, and the share price has inevitably travelled in the opposite direction. In 2019, when Dunkerton ousted a board he accused of failing to understand Superdry’s mojo and design ethos, the company was worth £440m. When trading in the shares was suspended on Wednesday, the value was £55m. The peak in January 2018 was a cool £1.6bn.
However, Superdry is still standing and, unlike many other distinctly British mid-market names, has its independence. Ted Baker, after its own struggles, sold itself last year to the US group that owns Reebok. Joules was rescued from administration by Next. The middle ground is tough in the current climate.
The big open question is whether Superdry’s hard-to-define brand (“Sporty in a way that appeals to people who like the idea of snowboarding but who don’t actually go,” reckoned the Guardian’s then head of fashion in 2011 when the Japanese logos first seemed to be everywhere) is capable of getting back to the peak.
Dunkerton’s faith is undimmed, obviously. The brand is “in sound health and has momentum”, he reckons, pointing to “our strongest jacket sales ever” in the 2022 autumn/winter collection. One cannot accuse him of failing to back his optimism with his own money. He underwrote the £11m fundraising himself and has been buying shares to top up a personal stake of just over 25%.
On the other hand, overall sales fell “well below expectations” in the past financial year – albeit revenues of £622m, up 2%, suggest a certain resilience. The full-year pretax loss was £21.7m even ignoring the non-cash whacks for store writedowns and suchlike that took the statutory outcome to minus £148m.
The strategy from here is keep chiselling away at overheads while overhauling a weak wholesaling operation that sells to department stores and independent retailers who have troubles of their own. Doing all the overseas wholesaling out of the Cheltenham HQ no longer works, reckons Dunkerton, thus faith is being placed in local agents in important continental European markets such as Germany.
The City’s view? “Execution risk remains high,” said analysts at Investec politely. It will be an impressive turnaround if it happens from here.
