Updated: Shares in Superdry have plunged by more than 38% today after the clothing brand warned this morning that its annual performance will be weaker than previously expected. The move has prompted co-founder Julian Dunkerton to step up his campaign to be reinstated “in the next few weeks”.
Underlying profit before tax fell 49% to £12.9m in the 26 weeks to 27 October and the company now expects profits in the current financial year to be somewhere between £55m and £70m. Analysts had predicted around £84m.
Revenue was up 6.4% to £831.8m, though this was driven by online sales as store revenue decreased. Shares in Superdry fell 31% to under 400p in early trading and by mid-afternoon had dropped by 34%, finally closing down 38.06% at 355p. For context shares began the year at around 2,000p.
It comes amid a boardroom bust-up between the current management and Superdry’s co-founder, Julian Dunkerton, who is trying to stage a comeback at the company.
Superdry chairman Peter Bamford said on a call with journalists this morning that the board believes Dunkerton’s views on strategy “have not evolved with the needs of what is now a multi-channel, international and increasingly digital retailer”.
The group is to complete a review of its store portfolio by the end of March next year and will consider closures, downsizing, relocation or renegotiation of rents as it looks to cut costs.
The company blamed unseasonably warm weather for the poor performance of the first half, given its reliance on sales of jackets and winter clothing. But chief executive Euan Sutherland reiterated his confidence in the current strategy, which will see the brand diversify its ranges.
“Our comprehensive transformation will ensure Superdry is well positioned as we optimise our routes to market and make our business more efficient,” he said.
“We are confident that our transformation programme combined with the underlying operational strengths of the business will deliver a return to higher levels of growth and profitability while realising geographic expansion opportunities and leveraging our multi-channel operating model to serve customers in whichever way suits them best.”
As part of the new strategy, the company also announced today the launch of a kidswear range (pictured). The move has been criticised by Dunkerton, who says it will weaken demand for the brand among teenagers.
But Paula Kerrigan, Superdry’s director of strategy, said: “We know our existing customers want to see us offering Superdry Kids and we believe this also offers a real opportunity to bring new consumers to our exciting brand. We will disrupt the kidswear market by relentlessly innovating product while offering Superdry’s exceptional quality, design detail and value for money.”
Fiona Cincotta, a senior market analyst at www.cityindex.co.uk said the weather only partly explained the brand’s woes and raised concerns about product and brand perception.
“Once again warmer-than-usual weather has been cited as a culprit for disappointing investors. Of more concern, though, management has fessed up to a lack of innovation in its clothing range.
“The constant run of downgrades will only harden suspicions that the Superdry brand is simply no longer cool, even as the company expands into to new categories like dresses and sports gear.
“Colder weather over Christmas could yet spark a recovery in demand for the coats and sweats that remain the crux of Superdry’s offering. But management’s guidance for December suggests they won’t be holding their breath for a rebound.
“Perhaps a design and product-pricing intervention is needed, lest Superdry go the way of FCUK,” Cincotta said.
The slump in profits and share price provoked Dunkerton to up his campaign to be re-instated at the firm he co-founded 15 years ago, having stood down in March of this year.
Dunkerton has said he would lock down his 18% shareholding and consider the purchase of more shares to prove his commitment to turning the business around. He has urged shareholders to back his return within the next few weeks in order that he can begin to turn the company around by next Christmas.
He told The Guardian that “enough is enough” and now is the time to act. “It’s a horrible thing to look at your own company and see it decimated,” Dunkerton told the newspaper. “The reality is I predicted absolutely everything – that’s why I left, and that’s why I’m coming back.”
Words: Press Association with additional reporting from The Industry.