Superdry suffers as Covid hits store sales, but says brand reset is on track
Superdry delivered bleak-but-expected news on Thursday as a trading update for the half-year to October 24 showed sales falling 23.3%. Although the second quarter’s sales fell by less than in the first (Q2 was down a smaller 22.8% than the Q1 24.1% drop), that was still a hefty decline.
It was clearly physical stores that were the problem as H1 sales there fell 44.8%, with Q2 alone down a still-large 32.1%. Wholesale was challenged too as H1 fell 28.8% and Q2 a sizeable 28%. But e-commerce was a saving grace as it rose 49.8% in the half as a whole and 16.9% in Q2.
The company admitted that its stores “continue to be impacted by Covid-related measures suppressing footfall, particularly in large city centre locations”.
Like-for-like store trading in the last six weeks of H1 was down 32.4%, with UK trade impacted by continued social distancing measures. But this was partially offset by a stronger performance in Europe “where footfall declines have been less severe”.
But the firm is back to square one with its stores in some ways because, as of 5 November, 122 stores are now temporarily closed across England, Wales, France, Belgium and Ireland, with a smaller 117 stores still open and trading.
As mentioned though, at least e-commerce is “performing well and strengthened through Q2”, with like-for-like sales up 51.9% in the last six weeks of the first half.
“The improvement was driven by owned site sales”, which increased 68.9% year-on-year, coinciding with the launch of its new AW20 product “and the targeted clearance of aged stock,” it said.
As the wholesale decline shows, this channel “faces many of the same headwinds as stores due to Covid-19 restrictions and uncertainty”. Its performance in Q2 in part reflects later phasing of AW20 forward order deliveries, with 68% shipped in the year to date compared to 84% at the same time last year.
As part of its turnaround, the company is trying to move away from promotional pricing, but Covid has delayed this and on Thursday it said that it has increased promotional activity to clear excess inventory as a direct response to the pandemic. This has seen it reducing the full-price mix and and taking a hit to the retail gross margin. But it was partially offset by the continued focus on both cost management and cash preservation actions.
However, it insisted that its “brand reset remains on track, despite the current unprecedented levels of disruption and volatility”.
And while it’s now seeing national and regional lockdowns in the UK and internationally, “which will restrict the operations of our store estate, [it’s] focused on maximising revenues over the Black Friday trading period from e-commerce”.
It said it has “commercial and operational plans to capture the expected elevated demand online across this important period”.
CEO Julian Dunkerton, whose return to the helm of the firm he co-founded has been marked by the most challenging conditions it has ever faced, said: “Covid-19 continues to disrupt our store and wholesale channels, but this is being partially mitigated by strong sales through our e-commerce operations.
“This has been an important period for Superdry, with the launch of our full Autumn/Winter 20 ranges and a true focus on using our social channels to reach our customers and bring our brand reset to life. This activity is delivering record levels of engagement through our influencer-led Autumn campaigns, and we will focus our energies in this area over the coming months led by our new Chief Marketing Officer, Justin Lodge.
“The external outlook is very uncertain. However, we have financial flexibility and are making good progress with our strategy and brand reset. We are determined to do the right thing by all our stakeholders — including colleagues, our retail and wholesale customers and investors — to ensure the business and brand returns to success.”
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