Superdry, the UK-based fashion retailer, has reported a significant decline in its financial performance as a result of the Covid-19 pandemic. The company’s full-year results for the 52 weeks to April 25, 2020, revealed a 19.2% decrease in total revenue, falling to £704.4m. Furthermore, the gross margin declined from 55.1% to 53.6%, and the loss before tax widened to £166.9m compared to £89.3m the previous year. The final loss for the year, including a store impairment charge of £136.8m, stood at £174.9m.

While the pandemic played a major role in the company’s poor performance, other factors also contributed to the decline in revenue. Superdry had initially intended to move away from persistent discounting, which had an impact on its revenue. However, the closure of all its stores from March 22 until the end of the financial year had a significant impact as well. Despite these challenges, Superdry implemented several strategies to mitigate the impact of the pandemic on its profitability. These strategies included closing three out of four warehouses in the US, closely managing stock, reducing spending, and focusing on digital channels during lockdown periods. The company also managed to negotiate short-term rent deferrals and accelerated lease renewals, resulting in an average 43% reduction on 49 leases.

In terms of cash flow, Superdry stated that it has sufficient funds to continue operating. The company also highlighted its new AW20 product range as a crucial step in its brand reset. Under a new design philosophy, Superdry aims to target nine unique consumer types through four distinct style choices. Co-founder and CEO Julian Dunkerton expressed cautious optimism, noting that increased digital engagement resulted in a stronger women’s wear mix and an increase in full-price sales, which positively impacted the gross margin. Dunkerton also emphasized the company’s commitment to its business reset, despite the challenges posed by the pandemic.

However, Superdry recognizes that trading has been disrupted and continues to be challenging. While most stores have reopened, the company has resorted to discounting to clear excess stock accumulated during store closures. The trading figures during and since the lockdown reflect the impact of the pandemic. In the first quarter of the new financial year, group revenue fell by almost 37%. This decline improved to 18.1% in June and 19.8% in July. However, the seven weeks leading up to September 12 saw a 30.3% fall, which was not fully explained as the second quarter is typically the weakest for the company. The biggest decline in sales occurred in physical stores, while e-commerce saw significant growth in May and June, but only a 4.1% increase in the seven weeks leading up to September 12.

Superdry’s trading performance varied across regions, with Europe performing relatively better than the UK and the US. Stores in Europe experienced a 32% decline year-to-date, while the UK and the US saw declines of 55% and 75%, respectively, due to later reopenings and store closures. Despite a stronger than anticipated performance in the first quarter, Superdry remains cautious about the shape of the economic recovery and its impact on the company’s ability to turn around its performance according to its plan. The company anticipates an improvement in store trading for the remainder of FY21, although like-for-like sales are expected to remain negative. Wholesale sales are also expected to improve through in-season sales, with a strong recovery in franchise store like-for-like sales in Europe, and the normalization of spring/summer forward order shipments. E-tail sales are also expected to continue to rise.

Useful links:
1. Retail Gazette – Superdry’s Full Year Results
2. BBC – Superdry Reports Financial Impact of Covid-19