Superdry sales disappoint, considers further fundraising and cost-cut actions
Sales are growing but more slowly than hoped for, it has withdrawn its profit guidance, and it’s considering raising funds via an equity issue.
The company said retail sales “continue to show good like-for-like growth, albeit at a slower rate than anticipated” and while “progress has been made with our wholesale partners to support their recovery, sales performance continues to be challenging”.
It means FY23 revenue is now expected to range from £615 million to £635 million. That’s up from £609 million a year earlier, but isn’t where the company wanted to be at this point.
It has withdraw the “broadly breakeven” profit guidance for FY23 but didn’t say exactly what it’s expecting profit (or loss)-wise.
In terms of ready cash, it said the previously-announced Asia Pacific region IP sale that’s expected to deliver around £34 million in net proceeds, is “progressing well” with a shareholder circular anticipated to be published in May.
And initial cost savings of around £35 million have been “identified and externally validated, which are expected to deliver a material uplift in underlying profitability over the medium term”.
Its credit facility partner, Bantry Bay, “remains supportive… and has increased the flexibility of the facility”.
And the firm is considering options to raise capital, “including a potential equity raise up to 20%, fully supported by Julian Dunkerton
As for the disappointing trading, Superdry said that retail sales in February and March, while “showing significant year-on-year like-for-like growth, have not met our expectations”.
It partly blamed factors it couldn’t control such as “the cost-of-living crisis having a significant impact on spending and footfall, and poor weather resulting in less demand for our new spring-summer collection”. These trends have been seen across both the UK and Europe.
And as mentioned, wholesale performance “continues to lag the rest of the group”.
It added that the “increasing amount of uncertainty arising from the final weeks of trading and the actions associated with the reorganisation of our wholesale division make the assessment of full-year profit challenging. Therefore, the board has taken the decision to withdraw the previously issued guidance of broadly breakeven for our FY23 adjusted profit before tax”.
On the turnaround plan, it said its cost savings will be achieved “through estate optimisation, logistics and distribution savings, better procurement, and continued range reduction. The company expects these savings to be fully realised by the end of FY24, with the costs to achieve them primarily incurred in calendar year 2023”.
It’s also currently “reviewing further re-engineering options to deliver additional savings” that should boost medium-term underlying profitability.
Julian Dunkerton said of all this: “The Superdry brand continues to evolve but there is no doubt that the market conditions we face are challenging, compounded by the issues we have previously disclosed and are working to address in wholesale. As a result, while we continue to deliver like-for-like growth in retail sales, we need to ensure our business is in the right shape to navigate these difficult times, which is why we are looking hard at our cost base.
“My belief in the Superdry brand is stronger than ever which is why I’m prepared to provide material support to any equity raise undertaken. I am confident that we have the right plan and, working together as a team, the business will emerge from the current turbulence stronger than ever.”