Superdry's full-price strategy paying off

It might seem oxymoronic to market a company as both “premium” and “affordable” but that is the message Superdry (SDRY) chief executive Julian Dunkerton has been selling as he drives forward a full-price strategy which eschews discounts at the clothing, accessories, and footwear retailer. This strategy paid (metaphorical) dividends in the year, as evidenced by a 15 per cent jump in the shares on the morning of these results; good news for investors after several years of poor performance since an early-2018 peak.

The pricing stance helped push the gross margin up by 350 basis points to over 56 per cent, with the full-price retail sales mix rising by 26 percentage points. Retail and wholesale cash profit margins also made notable progress, up by 10 per cent and 22 per cent, respectively, as Superdry returned to profit against a comparative period of store closures and restrictions. Price rises for the autumn and winter collections this year and the spring and summer collections in 2023, along with the introduction of delivery charges for online orders, should help the top line and profitability further.  

Analysts at Peel Hunt said on the back of these results that “Superdry’s recovery is more tangible and profitable, on a valuation that appears to have given up”. That’s a fair statement, given the shares trade at just six times the house broker’s forward earnings forecast. A cheap valuation and a return to the black is supported by solid current trading, with total revenue up by 7 per cent for the 22 weeks to 1 October despite a challenging retail environment, although the gross margin fell back by 230 basis points in the same period. Hold.

Last IC View: Hold, 255p, 20 Jan 2022