Superdry annual losses widen, Q1 was challenging but AW23 offer has strong start

Superdry released its slightly delayed annual results on Friday with the period up to the end of April seeing a small revenue rise as the “brand recovery continues”, but a much wider loss.

Importantly too, it included a Q1 trading update for the three months to the end of July. It showed group revenue down 18.4%, but was “broadly in line with our expectations as full-price trading and the cost efficiency programme are driving margin improvement”.

Store revenue in Q1 declined 3.7% on the year, “largely on account of the unseasonable weather, and a later start to our end-of-season sale”. And e-commerce sales dropped 12.6%, also affected by the clearance sale timing, “as well as a profit-focused reduction in spend on digital marketing”. In total, its Retail segment was down 6.6%.

Meanwhile, Wholesale Q1 revenue plummeted 50.3% and while that’s partly a result of year-on-year timing differences, adjusting for these, the underlying performance is still around 30% down. That reflects “changes including the decision to exit our US wholesale operation”.

It said wholesale production and distribution has long lead times, “and it will take some time for the impact of the new leadership in this area and the reversion to an agency model in some major European markets, to be seen in the sales performance”.

Back with the full-year results, group revenue rose 2.1% to £622.5 million. Bearing double-digit inflation in mind, that wouldn’t be a real terms rise, although in Superdry’s favour is the fact that the latest year contained 52 weeks and the previous one was a 53-week period.

Retail growth of 14.6% was offset by a 19.1% decline in Wholesale “as it continues to be impacted by a more cautious outlook from partners”. Stores revenue rose 14.7%, “recovering from Covid in the US and UK, with strong peak holiday sales”.

And e-commerce revenue jumped 14.3%, due to “good third-party site performance and our best Black Friday event”.

But the gross margin was down 3.2 ppts to 52.8% “due to continued clearance of aged stock”, a process that has been going on for some time.

It added that the delayed recovery in Wholesale, and the return to normal rent and business rates impacted underlying profitability, resulting in an adjusted loss before tax of £21.7 million from a profit of almost exactly the same amount a year earlier. Meanwhile, the net loss ballooned to £148.1 million from a £22.4 million deficit, “mainly due to accelerated non-cash impairments of store assets of £43.3 million, a non-cash reduction in the recognised deferred tax assets from £66.3 million at FY22 to nil in the current year, and other adjusting items”.

On the plus side, it has shored up its balance sheet with cost savings, fundraisings and other initiatives. And the company increased the percentage of its garments that contain sustainably sourced materials (up to 62% and better than its 47% target).

CEO Julian Dunkerton called it “a difficult year for the business” and said the market conditions have been “extremely challenging, especially in Wholesale. We’ve looked closely at how we operate and have taken decisive actions to improve our position, rebuild liquidity, and recapitalise our balance sheet, through careful preservation of cash and a re-engineered cost base”.

He added: “The good news is that despite the external turbulence, the brand is in sound health and has momentum. Stores and e-commerce delivered a strong sales performance, and I’m excited by our collections for the Autumn/Winter 23 season. While Wholesale remains very challenging, I believe the new team in place will recover this business in the medium term. I’m really excited by our new partnership in Asia, finalised after year-end, which not only has helped rebuild our balance sheet but will ensure Superdry can achieve its potential as a truly global brand.”

Yet despite his upbeat assessment of its prospects, the company admitted that the consumer retail market remains “challenging and unpredictable”. That had a big impact for SS23 although, so far, the new AW23 collection “is selling better this early in the season than usual”. And “building on the success of our jacket collection last year, we continue to anticipate another strong year for our outerwear,” it said.

But for the full year, it doesn’t expect to see significant revenue growth “as we focus on cost savings and margin improvement”.