(Bloomberg Opinion) -- Anyone who thought the return of Superdy Plc co-founder Julian Dunkerton would fix the business as quickly as you could say “logo hoodie” has been sorely disappointed.
The company cautioned on Wednesday that the current financial year would be a “reset” – revenues would be slightly down although profits should increase modestly. The dampened expectations came as the company announced full-year earnings that were anything but super.
Superdry said 129.5 million pounds of one-time charges drove a loss of 85.4 million pounds in the year to April 27. That’s a big swing from the 65.3 million pound profit in the year earlier. Underlying earnings more than halved.
To recap: Dunkerton stepped down from Superdry in March 2018, having founded the business with James Holder in 2003 and floated it on the London Stock Exchange in 2010. Following his departure the company issued a string of profit warnings. The shares have plunged 70% since he left.
Clearly, the brand needed to change. There was no doubt that the board, which did include some seasoned retailers, needed to up its fashion and design credentials.
And, change was achieved. In April, shareholders voted Dunkerton back onto the board. Chief Executive Officer Euan Sutherland, the chairman and finance director all resigned, and Dunkerton, who holds 18.4% of the shares, became interim CEO.
But returning the founder to the helm was the wrong move.
Superdry’s early days as a listed company were also marked by a string of profit warnings, including one, in 2012, when it suffered a mix up between a plus sign and a minus sign in its forecasting. This may have been due to growing pains, but it hardly instills confidence. Sutherland may also have made mistakes, but he did introduce some much-needed professionalism to the company.
The problem is that the brand has lost its cool factor. Once that happens, it is very hard to get it back, no matter how many Instagram influencers it engages. Superdry has simply aged with its customers, and it needs to adapt to this reality.
On Wednesday, Dunkerton set out his strategic blueprint. This includes refocusing on design, trying to make the brand desirable once more, improving store profitability and bolstering electronic commerce and wholesale.
That is sensible enough, but there are some elements that look risky.
It’s ditching children’s wear, for fear of diluting the brand. But this isn't a problem for the luxury labels, for whom the category is a sweet spot, and looks like a missed opportunity. Superdry wants to bolster its wholesale operation, but this has been a difficult segment of the market over the past few years. And part of the problem over the past 12 months has been an over-reliance on coats and jackets. This needs to be addressed if Superdry is to prove a more resilient business. However, logoed outerwear was one of the brand's early successes and is likely to continue to feature.
The group's previous management should have appointed a top-notch creative director, and sought to turn the group into a lifestyle brand, akin to Ted Baker Plc. That was their oversight. Now, despite some early positive signs, reviving Superdry will be a tall order.
With the shares falling so far – they trade on a forward price earnings ratio of just 8.8 times – perhaps there is little downside from here.
Given Dunkerton’s significant stake, as well as the first signs of private investors and buyout groups taking a chance on long-suffering consumer stocks, there might be scope for him to carry out his plans away from the public sector.
Until then, shareholders will have to hope that the retro look – digging into past management – pays off.
To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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