Superdry warns on future as Covid woes push trendy fashion firm deep into red

Superdry, the UK fashion retailer that has become one of the trendiest brands on the high street, has warned there are concerns over its ability to continue as a going concern after lockdowns hammered sales.

Superdry has grown to become a familiar sight on the UK high street. Picture: Greg Macvean

The firm slid to a £18.9 million pre-tax loss for the half-year to October 24, as the pandemic put its turnaround strategy on hold.

It told investors that risks associated with current uncertainty and the recovery in consumer demand “represent material uncertainty and may cast significant doubt on the group’s ability to continue as a going concern”.

As of January 9, 173 of its stores were closed due to lockdown measures, representing 72 per cent of its store portfolio.

It said this is the highest level of closures since April and it has a “material shortfall” in total sales against previous forecasts despite a 13.2 per cent increase in online sales in the 11 weeks to January 9.

Total sales were down by almost a quarter (23.4 per cent) to £282.7 million in the six months to October, it revealed in the trading update.

A 49.8 per cent increase in online sales only partly offset the impact of lower store revenues, which fell by 44.8 per cent over the period.

The group said it expects “prolonged store closures and subdued footfall” in early 2021 to continue to weigh on revenues, although shortfalls will be partially offset by rent waivers and furlough payments.

Bosses stressed that the company’s liquidity remains “strong”, with almost £55m in cash reserves.

Founder and chief executive Julian Dunkerton said the brand has continued to focus on its “reset” plan but it would take time to see the benefits in trading results.

“Covid-19 has brought substantial challenges to Superdry as with many other brands, and this has continued through the first half and into the second with renewed lockdowns in our key markets,” he told investors.

“Our team has responded incredibly well and above all we’ve been focused on looking after our colleagues and customers and ensuring everyone is keeping safe.

“While revenue and underlying profit have been impacted by the external conditions, the brand has continued to focus on the reset, however, with over 70 per cent of stores currently closed and having to shut a significant number over peak, it will take time to see the benefits of all our hard work flow through to the results.

“We are making great progress with our influencer-led, digital marketing strategy, enabling us to better target new and existing customers,” he added.

Analysts at brokerage Numis noted: “The profit impact looks to be more than offset by updated guidance on depreciation, but our forecast net cash position falls modestly.

“With peak trading navigated, and cash preservation well executed, focus is back to revitalising the brand, though we retain our hold recommendation as we await clearer evidence of progress.”

David Madden, market analyst at CMC Markets UK, said: “Superdry shares have tumbled on the back of the poor first-half figures. The pre-tax loss widened to £18.9m from £4.2m. The closure of stores due to the lockdown has hit the group hard.”

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