Superdry sales down but full-price strategy drives margin higher

today Nov 7, 2019
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Superdry’s results announcement are always worth watching these days as there’s intense interest in how Julian Dunkerton is doing at the firm he co-founded now that he’s back in control. So how is it going so far?


In a pre-close trading statement on Thursday, the company said that its “reset is under way with [a] full-price stance protecting [the] margin and brand”.

Bold words, but in practice, that means the 26 weeks to the end of October didn’t exactly look like an amazing success story as group revenue fell 11.3% to £367.8 million. Store sales were down 11.7%  to £157.3 million, e-tail fell 10.5% to £57.9 million and wholesale was down 11.2% to £152.6 million.

That was with the firm operating roughly the same selling space as it had a year earlier. But importantly, the store gross margin rose healthily. It was up 3.2 percentage points to 71.4%, which means that the full-price focus is yielding results. In fact, full-price sales made up about 70% of the mix this time compared to 52% in the prior year’s H1.

Given that the period also saw the company selling off some of the legacy stock created under previous management, it’s not a bad set of figures at this stage in the turnaround story. And that was reflected in the firm’s share price in early trading as the shares jumped 6%.

Overall, the revenue decline was attributed to “the need to address a number of legacy issues across the business,” and the company said the retail sales decline moderated through first half, with Q2 store revenue down ‘only’ 9.4% versus Q1 being down 13.9% as “key initiatives” were implemented.

Superdry said that in its owned stores, it’s working through legacy stock while “trading against periods of significant promotional activity in the prior year”. But “a focus on delivering an improved customer experience and choice, with more fixtures, more stock and more options [has] supported the improved Q2 performance. As expected, the full-price stance has resulted in a sales decline, but this has been partially offset by an improvement to gross margin”.

The sales fall in e-tail might be harder to explain as most retailers manage some kind of online increase even in challenging times. But the company said the decline “has slowed as we have begun executing on our growth plan. This includes the injection of new product to increase choice, making legacy options available online, delivering greater personalisation, improving the shopping experience and increasing social media exposure. We are also seeing the benefit to gross margin from our full-price stance, although this has been offset by lower-margin third-party growth”.

And the wholesale channel? It “continues to be impacted by the previous retail strategy of heavy discounting and lower-quality product, along with a change to align deliveries of forward-bought product to the requirements of wholesale customers rather than our reporting calendar,” it said.

The company added, though, that the forward order performance for its SS20 range “is more encouraging, as wholesale customers have reacted positively to a full-price retail position and improved product design and quality”.

So what did comeback king Dunkerton have to say about all this? “We are making good progress with the start to our turnaround plan for Superdry, returning the business to its design led roots,” he explained. “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 for this peak and even more excited about the new ranges signed off for next year.

“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.”

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