Superdry profit warning spooks investors

An underperforming wholesale division is dragging Superdry (SDRY) down. In its half-year results, the retailer changed its pre-tax profit estimate to “broadly breakeven” – down from a previously-stated range of £10mn-£20mn. 

All told, the company reported a statutory loss before tax of £17.7mn, a significant fall from the £4mn profit it reported in the first half of the 2022 financial year. Management attributed a critical 5.2 per decline in wholesale revenues to “a lagged recovery after Covid” and shipment timing issues. 

“We reorganised our team and our approach to support our wholesale partners and expect to see their confidence return following the retail success of autumn/winter 22,” said chief executive Julian Dunkerton. Superdry’s partners, particularly those in mainland Europe, had retained a large amount of inventory built up over the pandemic period. This led to reduced levels of higher-value, in-season sales than the retailer had anticipated.

Performance in its own stores was better, especially throughout the nine weeks of Christmas trading beginning 30 October. During this period, group revenue was 4.5 per cent higher than in 2022 as shoppers continued to return to bricks-and-mortar shops. Meanwhile, retail revenue was up almost 25 per cent, which the company attributed to colder weather driving demand for outerwear. 

The company admits there’s still a Covid-linked “confidence lag” in its wholesale business, which it hopes will close after partners see how sales have grown through its own channels this winter. Markets, however, baulked at Superdry’s profit warning – with shares falling 18 per cent on the day of the announcement. We’ll stay on the sidelines while the brand’s wholesale partners decide their next moves. Hold.

Last IC view: Hold, 120p, 7 October 2022