Superdry warns over going concern risks as Covid-19 hurts sales

Zoe Wood and Julia Kollewe
·3 min read
<span>Photograph: Maureen McLean/Rex/Shutterstock</span>
Photograph: Maureen McLean/Rex/Shutterstock

Superdry shares have fallen sharply after the fashion brand issued a going concern warning, although the company’s founder insisted the business would survive the turmoil caused by the pandemic.

The company’s shares closed down 16% after the uncertainty hanging over the business’s future was compounded by a gloomy financial picture of widening losses and a steep decline in sales over the key Christmas weeks.

Julian Dunkerton, the company’s co-founder, who was reinstated two years ago after leading a successful boardroom coup, described the going concern warning as a “technicality” and explained its financial situation had improved since it was first added to the company’s accounts in 2020.

“The reality is we’ve got £130m worth of liquidity and we didn’t even go overdrawn last year,” said Dunkerton. “If we were going to have any trouble, it would have been last March … but we didn’t. We’ve got cash, banking, and now we’ve got the end of the pandemic in sight.”

Dunkerton, who started out selling clothes on a Cheltenham market stall, launched Superdry with the designer James Holder in 2003. Their first store opened in 2004 and after a period of rapid growth the firm listed on the stock exchange six years later.

Even before the pandemic struck the businessman had warned a turnaround would take several years but, in common with other retailers, Superdry has been dealt a severe blow by the pandemic.

The company said the disruption caused by Covid-19, including sudden and protracted store closures, made it “more difficult than ever to forecast the outturn for the year. Consequently we recognise the material uncertainty noted in our going concern assessment, and we are not providing formal guidance at this time for full year 21 or beyond.” The shares closed down 39p at 201p.

As of 9 January, 173 stores were temporarily closed, equivalent to around three-quarters of the group’s total. The company posted a pre-tax loss of £19m in the six months to 24 October on revenues of £283m, against a £4m loss a year earlier. Over the 11 weeks to 9 January sales were down 27%; while store sales halved, the company’s website sales grew at 13%.

In recent years Superdry has been a rollercoaster ride for City investors. Its financial performance had gone backwards under the previous management, led by chief executive Euan Sutherland who has since joined over-50s specialist Saga, with the accompanying share price collapse causing Dunkerton to agitate for a return.

Dunkerton said it would take time for work being done behind the scenes – including a push on using sustainable fabrics – to show up in the numbers, but the company was doing the right things, including recruiting the right “influencers” to reach young shoppers. It is now working with the Brazilian football star Neymar Jr, who has 143 million followers on social media.

GlobalData analyst Gemma Boothroyd said the brand’s relevance had faded in recent years as consumers defected to cheaper rivals such as Asos as well as to desirable sports brands such as Nike and Adidas.

“Given that Covid-19 lockdowns will continue to impact sales in the short term, Superdry’s new strategy to target and attract a younger demographic is imperative for its long term survival, as these shoppers are more accustomed to shopping online,” said Boothroyd.