Superdry (SDRY) founder Julian Dunkerton is on a crusade, of sorts. Having left the group altogether in March this year – he stepped down from day-to-day management in 2014, handing over to current chief executive Euan Sutherland – he’s now aiming to re-join the company he co-founded in 1985.
By March 2018, rumour had it Mr Dunkerton was leaving the company to pursue charitable endeavours. While he insists that he does “give a lot away”, when the same excuse was peddled by company representatives following his whopping £71m share sale in July (equating to 6.7 per cent), it didn’t convince. Our subsequent sell advice (1,211p, 2 August 2018) was followed by a profit warning just over two months later. He now admits the sale was done in protest at the current strategy: "I just couldn’t put my money on it" he says.
Superdry's shares have more than halved in value over the past 12 months. Management has blamed the summer heatwave, as well as "well-publicised" challenges facing some of its trading partners – which include the recent collapse of department store House of Fraser – for the potential £10m shortfall in full-year profits. Pursuit of an 18-month transformation plan continues, but Mr Dunkerton says now is the right time to return to the group.
As the largest shareholder – he still owns 18.5 per cent – Mr Dunkerton already has significant sway. So why not try to affect change from an activist shareholder position? He says it’s not enough. Having voiced concerns about Superdry’s strategy as early as last Christmas, he claims he "wasn’t being listened to". Writing letters and making personal appeals to the board only fell on deaf ears.
So why not let it all go? Sell out, get out, start over. Not an option, he says. Mr Dunkerton says he feels "a great sense of personal responsibility" to the employees, the shareholders and himself. "The situation is recoverable," he says – he just needs to get back in. It’s his belief that within four weeks he could be back in charge of brand and design – something he thinks has been neglected as part of the current strategy. "I’m always thinking of the consumer experience first," he says. "What can we offer them, and how?" Specifically, that means focusing on "what [Superdry] does best" – producing more options within 'core' categories such as jackets and outerwear, instead of expanding into trendy categories such as denim in a bid to appeal to younger customers.
Having already met with eight out of the 10 largest shareholders – as well as two anonymous activist fund managers – Mr Dunkerton’s campaign is gathering momentum. Adding further fuel to the fire, Mr Dunkerton has said he’s willing to commit to a new share tie-up to prove his commitment to the company. But a lock-up deadline could be interpreted as a possible turnaround timeline too. Possibly, he says, but a return to the company within the next four weeks allows enough time to affect change as soon as next spring in his view.
But just how Mr Dunkerton might return to the company remains unclear. The company could call an emergency general meeting (EGM) to vote on his return, although this would be likely to include a vote to change the current management line-up too. Mr Dunkerton says he’s "willing to work with anyone", but quite how Mr Sutherland and chief financial officer Ed Barker would feel about a vote of no confidence in their current strategy remains to be seen. In fact, chairman Peter Bamford has already pledged his allegiance to the current strategy, following a meeting with Mr Dunkerton on 1 November.
