Superdry Plc Trading performance continues to be weak

Superdry Plc (LON:SDRY) announced a trading update for the 13-week period from 27 January 2019 to 27 April 2019 (‘Quarter 4’).

 Performance Highlights

–     Global Brand revenue up 3.6% over full year

–   Poor Wholesale and Ecommerce performance in Quarter 4, actions to address this underperformance underway

–     Improved own store performance in Quarter 4

–     Full year underlying profit before tax likely to be below the range of market expectations

–     Following management changes on 2 April, initial actions to stabilise performance and improve the long-term prospects of the Company already being implemented

 Revenue^1,2

· Global Brand revenue1 of £1,736.1m increased by 3.6% year-on-year.

· Group revenue flat year-on-year (0.0%), but declined 4.5% in Quarter 4. Specifically:

o Wholesale revenue up 3.6% to £335.0m year-on-year, though declining 9.3% in Quarter 4. The Quarter 4 decline was driven by increased levels of returns, lower than anticipated in-season orders and decisions not to ship to customers that had reached their credit limits.

o Ecommerce revenue up 1.6% year-on-year to £163.7m but Quarter 4 revenue down 3.9%. Performance was impacted by the reduction of year-on-year discounting, including the removal of planned promotional activity at the end of Quarter 4.

o Store performance improved in Quarter 4, growing 2.2% but down 3.7% to £373.0m year-on-year.

· Comprehensive programme to deliver £50m+ gross cost savings by FY22 continuing.

· Primarily as a result of the weak Wholesale and Ecommerce performance, along with other measures to deliver the new operational strategy, we now expect FY19 underlying profit before tax to be lower than the current range3 of market expectations. A further detailed update will be provided at the full year results announcement on 4 July 2019.

· As a result of the store portfolio review announced by the Company on 12 December 2018, the Company will make a non-cash onerous lease and store impairment provision. Given the management transition and the consequent need to update the Company’s longer term strategic plans, the review has not yet been finalised but will have an impact that benefits both FY19 and subsequent years. Further details will be provided at the full year results announcement on 4 July 2019.

· In the five weeks since the change of management on 2 April, Interim Chief Executive Officer Julian Dunkerton has already identified immediate opportunities to improve the efficiency and performance of the business, and taken action to implement these opportunities. Immediate actions have included:

o Increasing the number of options sold online with those additional options generating full price sales.

o Repopulating selected flagship stores with a greater density of stock.

o Reducing unnecessary promotional activity resulting in enhanced margins and strengthening the brand.

o 500 new products to be introduced in the first 6 months.

A further update on strategic progress will be provided at the full year results announcement on 4 July 2019.

Julian Dunkerton, Superdry Plc Interim Chief Executive Officer, said:

“I am very excited about being back in the business. There’s a lot to do, but after five weeks, I am more confident than ever that we can restore Superdry to being the design led business with strong brand identity I know it can be. My first priority has been to stabilise the situation, and all of us in the business are putting all our energy into getting the product ranges right and improving the Ecommerce proposition, which are two important steps towards addressing Superdry’s recent weak performance. The impact of the changes we are making will take time to come through in the numbers but I’m confident we are heading in the right direction.”

Peter Williams, Superdry Plc Chairman, said:

“I’m delighted to have joined Superdry. This is a fantastic British brand, and I firmly believe that with the plans Julian is putting in place it will be a great success story once again. Today’s statement shows the scale of the challenge ahead of us. The Company’s financial performance won’t be turned around overnight, but we know what we need to do, and we are wasting no time in addressing the challenges which the business faces. This includes ensuring the correct corporate governance structure and Board is in place to guide the business going forward. I believe that we are doing the right things to get the business back on top form and delivering long-term sustainable growth for shareholders.”