Superdry hurt by lockdowns but recent trading improves
The pandemic may only have affected the final period of Superdry's latest financial year, but its performance was “materially impacted” by Covid-19 disruption, the company said as it delivered its full-year results on Monday.
The 52 weeks to April 25 saw total revenue falling 19.2% to £704.4m while the gross margin dropped to 53.6% from 55.1%. Its loss before tax was £166.9m, wider than the £89.3m loss of a year earlier. It all meant that the final loss was £174.9m (including a store impairment charge of £136.8m), bigger than the £124.2m loss of the previous financial year.
Of course, the big question is, how much of all the negatives in that list of figures were accounted for by the effects of the pandemic? In fact, part of the reduction in revenue wasn’t Covid-linked and was down to company’s wider strategy with the firm saying that it reflected “a planned move away from persistent discounting”. But the fact that its entire store estate closed from 22 March until year-end had an undeniably big impact.
The retailer has been working hard on its turnaround and other strategic improvements, boosting the experience in-store, accelerating its sustainability focus, and growing its social media following by 14%.
And in terms of actions with a direct impact on profitability, it has closed three of its four warehouses in the US, managed stock closely, cut spending and focused heavily on digital during the lockdown periods.
Importantly too, it also negotiated short-term rent deferrals and accelerated lease renewals across its store estate, achieving on average 43% reductions on the 49 leases agreed to date.
So where does this leave it as of now? Well, the firm still has more than enough cash available to continue operating. And on Monday it said that the AW20 product range is “a key milestone in our brand reset, under our new design philosophy, which clearly targets our nine consumer types through four distinct style choices”.
And co-founder/CEO Julian Dunkerton was cautiously upbeat. Importantly, he said increased digital consumer engagement, “helped drive a stronger womenswear mix than we have ever seen before”. And he’s pleased the company has delivered “a good increase in the full-price mix, which has had a positive impact on gross margin”. He added that the firm is “delivering on the reset of the business, despite the impacts of the pandemic”.
That said, trading "continues to be disrupted”, but it has improved from the end of FY20 as most stores are now open and as it has taken “a flexible trading stance”, meaning discounting more in recent months to help clear excess stock which accumulated during the store closures.
The company provided figures to show just how trading went during and since the lockdown, and they make interesting reading. At the start of the new financial year’s Q1 (the five weeks to the end of May), group revenue fell nearly 37%, but in June, it was down only 18.1% and for July the drop was similar at 19.8%. Yet the seven weeks to September 12 have seen a 30.3% fall, which wasn’t fully explained as Q1 tends to be the weakest quarter for the firm and those seven weeks were in Q2.
It's understandable that the biggest drops during all of these months were through its physical shops, while it's e-commerce business saw increases of more than 100% in May and June with the rise close to 57% in July. However, in the seven weeks up to September 12, the e-commerce increase has only been 4.1%.
So the company is clearly seeing major challenges with current trading. It said stores in Europe have been performing comparatively better in the year to date (only down 32%) than the UK (down 55%) and the US (down a massive 75%). The US saw later reopenings and still has a small number of stores closed.
But while the latest seven-week figures don’t look very strong, the company said the run-rate is improving again in the most recent weeks.
Despite a stronger than anticipated performance in Q1, which is historically its lowest trading period, it’s still “cautious on the shape of the economic recovery, and the impact this may have on our ability to turnaround performance in line with our plan,” it said.
Yet for the rest of FY21, it expects an improvement in store trading from current levels, although like-for-like sales are set to remain negative.
Wholesale should see some improvement from current trading levels through in-season sales, with franchise store LFLs in Europe recovering strongly, and normalisation of the spring/summer forward order shipment timing. And the higher e-tail sales should continue.
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