Superdry update underlines tough environment, but outerwear is strong

It may only be a few days until Christmas but the news flow doesn’t seem to have slowed down and on Tuesday, Superdry issued a bleak trading update.

The company, which is still in turnaround mode, said that “despite progress on our cost savings programme and inventory reduction, full year profitability [is] expected to be impacted by [the] well-documented challenging trading environment”.

The update covered both the first half of FY24 to the end of October and the six weeks to 10 December.

It said “H1 2024 was characterised by a challenging consumer retail market and the abnormally mild autumn [that] resulted in a delayed uptake of our AW23 collection”.

It meant retail was down 13.1% year on year, with stores and e-commerce both impacted by the warmer weather, as well as a later start to its end-of-season summer sale. E-commerce was also hurt by a “profit-focused reduction in spend on digital marketing”.

Wholesale didn’t fare any better and was actually down 41.1%, although this was partly expected due to the decision to exit its US wholesale operation. But the drop was also driven by “timing differences and the underperformance of the channel”.

That said, “the more seasonal weather seen recently in the UK and Europe, along with Superdry’s longstanding strength in outerwear, has led to a pick-up in sales”. But “despite some more encouraging trends, sales in the six weeks since the half-year are still down around 7% on a like-for-like basis”.

It’s clear that Superdry retains its outerwear popularity but is still struggling to move beyond that with the retailer not seen as a natural place to look for some other categories. 

The company said that “performance has been significantly below management expectations” and profits for the year are expected to reflect the weaker trading seen to date. A further update will be provided with its interim results in January.

But the company added that its cost-efficiency programme remains on track with an initial £35 million of cost savings expected to be realised within the year. And the group continues to assess opportunities to further reduce the fixed cost base of the business.

Its inventory reduction programme is also on track as clearance of aged stock has continued and it has been shoring up its balance sheet with deals for an IP joint venture and disposal of assets in the South Asian region to its partner Reliance Brands, plus a secondary lending facility of up to £25 million agreed with Hilco Capital.

CEO and founder Julian Dunkerton said: “The unseasonal weather through the early autumn led to a delayed uptake of our Autumn/Winter range and this impacted sales in the first half of the year. Whilst we have seen modest signs of improvement through the recent spell of colder weather, current trading has remained challenging, and this is reflected in the weaker than expected business performance. The operational progress we have made in the first half has been more encouraging with the IP sale for the South Asian region and strong progress on our cost efficiency programme.”