Dunkerton remains confident of returning Superdry to sustainable long-term growth

Dunkerton remains confident of returning Superdry to sustainable long-term growth

Despite ongoing efforts to turnaround its business, UK clothing retailer Superdry today (7 November) booked a double-digit drop in group revenue in the first half of the year, with declines across all channels. 

However, shares in Superdry were up by more than 6% after CEO Julian Dunkerton said the group was "making good progress with the start to our turnaround plan for Superdry, returning the business to its design led roots."

For the 26 weeks ended 26 October, group revenue tumbled 11.3% to GBP367.8m (US$473.2m), compared to GBP414.6m in the year-ago period. Wholesale revenue also decreased, falling 11.2% in the period to GBP152.6m, while e-commerce sales fell by 10.5%. 

Meanwhile, sales at its bricks and mortar locations dropped 11.7% on last year to EUR157.3m, as the retailer continued to work through legacy stock whilst trading against periods of significant promotional activity in the prior year. Average retail space edged up 0.1%.

Gross margin expanded 3.2 percentage points to 71.4% from 68.2% last year.

"We have always said it will take time, but we have a strong team which is working incredibly hard to deliver this plan. I'm genuinely excited by new injection product which has started to land in stores and even more excited about the new ranges signed off for next year," Dunkerton added.

"We are moving the business away from a reliance on constant promotions, and while this focus on full price sales has affected revenue in the first half, this is being partially offset by a better gross margin performance. There is good momentum in the business, and I remain confident of returning Superdry to sustainable long-term growth."

Looking ahead, Superdry says it will take two to three-years to gain full control of the product and costs.

It adds: "We are confident in delivering further benefits from reset initiatives across Superdry in the second half. However, we remain cautious about the challenging market conditions over the peak trading period."

Slow progress for Superdry 

James Yacoub, retail analyst at GlobalData, notes that while Dunkerton has been given until April 2021 to implement his turnaround plan and steady the ship, "the latest results are yet to show much concrete evidence of improvements so far.  

"Dunkerton insists that good progress has been made in implementing his transformation plan with store gross margin improving by 3.2 percentage points and full-price sales mix increasing to 70% versus 52% last year. However, in order to prove Superdry's strategy is the right one, the retailer needs to demonstrate positive revenue results in the long term."

Yacoub adds Superdry's competitors have more refined propositions and are more in tune with their customers' needs.

"JD Sports, for example, has remained relevant to its core customer base by continuing to stock the latest and most popular athleisure brands as well as partnering with prominent influencers. Effectiveness of its strategy is reflective in its first-half 2019/20 results (for the 26 weeks ending 3 August) in which it achieved 10% like-for-like revenue growth."  

In contrast, Dunkerton's plan to bring back design excellence and restore store profitability whilst simultaneously implementing its strategy of reducing promotional activity and focusing on full-price sales, "will prove to be an arduous task."

"As Superdry attempts to reignite its brand appeal, it should focus on updating its style credentials and also highlight its high-quality materials. It must now find a way to futureproof the brand – positive steps have been taken in hiring ex-Nike executive Phil Dickenson as creative director who can breathe new life into the business and potentially help restore Superdry's long lost 'cool factor'.

"This will, however, be no easy task and will require loosening the purse strings on the marketing budget – an effective marketing campaign is much needed to help transform Superdry's brand perception.''