Superdry upbeat but cautious as profits return
Superdry had generally good news on Friday as it reported preliminary results for the 53 weeks to the end of April and talked of a return to profitability, as well as “good progress” on its strategic objectives.
Its report wasn’t all perfect, with a few red flags in there about lower profit for the current year and a lending facility not yet signed, sealed and delivered. But the overall tone was confident.
And in a sales update for the current year, it added that the 22 weeks to the start of this month saw group revenue rising 7% with its Stores channel up 14.5% year on year, E-commerce up 4.5%, Retail up 10.7% and Wholesale rising 1.6%.
It said it’s “experiencing the sector-wide trends of traffic moving away from online and back to stores, a partial reversal of trends seen through the pandemic, although store footfall has still not fully recovered to pre-Covid levels”.
Encouragingly though, and despite the present consumer backdrop, "performance across Retail has strengthened since the launch of Autumn/Winter ranges”.
And Wholesale revenue has increased due to earlier shipments of AW22 product. “This has been particularly encouraging given we know our partners continue to work through higher levels of residual stock as a result of the pandemic,” it said.
Of course, it’s not all rosy and the gross margin for the 22 weeks is down 230 basis points on the prior year, “largely driven by expected intake margin pressures and some changes to [the] channel mix”. More of how that will affect this year’s profit later.
Back with those annual results for the last year, the 53-week period (which compares to 52 weeks in the previous year) saw an adjusted profit before tax of £21.9 million after a loss of £12.6 million in FY21. Statutory profit before tax was £17.9 million, up from a loss of £36.7 million.
That came as total revenue increased 9.6% to £609.6 million year on year, “largely as a result of lapping enforced store closures and lifting of restrictions in our key markets”.
The gross margin improved 350bps to 56.2%, a reflection of its full-price strategy.
Excluding the impact of the extra week in the latest year, group revenue would have risen 7.9% to £599.9 million and the gross margin would have been up 3.5ppts.
As of 1 October, the company had £38.9 million net debt, “driven by catch-up payments for Covid-related rents”.
So it all seems to be moving in the right direction with the business saying that SS22 sell-through was up 16ppts, “driven by performance in dresses and shirts”.
And other wins during the period include all 21 Superdry branded websites having migrated to its new microservices platform, “allowing us to enhance our online opportunity”. Meanwhile, its “influencer army” has grown by over 2,000 to 2,349 at the end of FY22. And its TikTok channel, which launched in September 2021, has reached over 450,000 followers in less than a year, with over 22 million video views.
FY22 also saw improved store profitability with 55 lease negotiations completed at an average reduction of 45%.
CEO Julian Dunkerton talked of “exceptional times for retail and for the economy more generally, and like all brands we’re having to work harder than ever to drive performance”.
He added: “Against that backdrop, I am pleased that we managed to return the business to full-year profit, driven by increased full price sales, whilst also making strong strategic progress. Superdry is a premium, affordable, brand, which should mean we are well-positioned as customers think more carefully about their purchases. That said, given the current challenging conditions, we continue to run the business prudently.”
LENDING FACILITY TALKS
He also highlighted the importance of refinancing the group’s Asset Backed Lending facility that expires at the end of January.
Superdry is “in positive discussions with prospective lenders”, but it has not yet “secured committed funding beyond this point. Until these discussions conclude, we recognise there is a material uncertainty around the going concern of the group, but remain confident on the prospect of a favourable outcome.”
Dunkerton added that the company has “maintained good inventory availability, despite predicted supply chain issues, which has allowed us to launch our AW22 season in line with our expectation. We expect revenues to continue to recover throughout FY23, although still not reaching pre-pandemic levels”.
The company believes increasing cost inflation, exacerbated by the conflict in Ukraine, will pressure operating margins globally. It “has taken action to hedge energy costs, but it expects to see inflation across other areas of the cost base.
And while FY23 profit will dip from FY22’s almost £22 million, it’s not predicting a return to losses any time soon. It expects to deliver an adjusted profit before tax of between £10 million and £20 million in the current year.
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