Unseasonably hot weather conditions and weak consumer confidence in key markets, coupled with foreign exchange costs, have forced UK clothing retailer Superdry to issue a profit warning for the full year.
Shares in the retail group sank around 22% this morning (15 October) after it issued a trading update ahead of its half-year results.
Superdry said it is expecting its full-year to be hit by the impact of unusually hot weather in the UK, continental Europe and on the East Coast of the US. This has “significantly” impacted demand for jumpers and jackets, which account for around 45% of the brand’s annual sales, and will hit earnings by around GBP10m (US$13.1m).
Historic foreign exchange hedging mechanisms that Superdry put in place are also to blame. The company says they have not provided the same degree of protection as expected, and will lead to around GBP8m in additional foreign exchange costs, split evenly over the financial year.
Superdry makes around 70-75% of its earnings in the second half of the year – and is currently five months into an 18-month plan to diversify its range to reduce reliance on winter sales.
“Superdry is a strong brand with significant growth opportunities, backed by robust operational capabilities, but we are not immune to the challenges presented by this extraordinary period of unseasonably hot weather,” said CEO Euan Sutherland. “We are well prepared for peak trading, but the second half of financial year 2019 presents both risks and opportunities.
“We continue to focus on delivering efficiencies and cost savings to meet the current challenges and have confidence in our strategy for growth and so are accelerating investments in our future. There are significant opportunities ahead for Superdry in terms of geographical market expansion, category extensions and growth and the ability to leverage its multi-channel operating model in a digital world to deliver to customers in whichever way suits them best.”
The company said it is continuing to invest in order to further drive growth. Based on its digital brand strategy announced in September last year, it plans to invest around GBP5m in the second half of financial year 2019 in brand communication, digitisation and automation across the business, and product development.
In its first-half, the results of which will be published on 8 November, Superdry said it expects to report mid-single digit global brand revenue growth, low-single digit owned store revenue decline, and low to mid-single digit statutory revenue growth.