Established by Julian Dunkerton and designer James Holder in 2003, the brand has lost almost 80 percent of its share price value since January 2017. By December 2018, it was trading at 450p, down from 2,040p at the start of the year.
After going public in 2010, Superdry became a household name thanks to its quirky faux Japanese styling of basic sportswear at a premium price, worn by celebrities from David Beckham to Kate Winslet. Relying heavily on a core assortment of logo tees, hoodies and jackets, Superdry struggled amid unseasonably warm weather last year, as cold-weather apparel accounts for 55 to 60 percent of autumn/winter sales, with November and December being the group’s busiest trading months. But the mild weather was just the latest in a series of setbacks.
Plagued by logistics problems
In 2011, the botched implementation of a new warehouse system caused significant operational problems when its interfaces with other systems failed. Says former CFO Chas Howes, “We missed Christmas that year, which, for a retailer where around 40 percent of profits are generated in a six-week period, is a serious issue!”
Beset by wholesale stock issues and falling profit margins due to changes in the sales mix, Superdry admitted to an “arithmetic error” worth £2.5m over its forecasts in 2012, coupled with misjudged demand at the end of the financial year.
Though the group’s sales actually rose by 3.1 percent to £414.6m during the first half of 2018, underlying profits fell by 49 percent to just £12.9m. Superdry chalks it up to “a weakening, discount-driven consumer economy.” While the stores never hold sales, shoppers are able to buy last-season stock and seconds on Superdry’s eBay clearance site or at wholesale outlet stores.
The cost of rapid expansion
Costs have risen as well: Mid-year accounts show a £15.8m increase in operating costs, attributable to logistics and expensive store openings. The number of stores rose 15 percent to 695 over the last year while online sales grew just 1.7 percent, to 26.9 percent. In December, Superdry issued a profits warning, saying it would make between £55m and £70m that year, far shy of £84m market projections.
Howes still believes in keeping pricing consistent, however. “Customers know what they’re going to get. It is phenomenally insulting to someone who goes in before Christmas and pays £24.99 for a T-shirt, then two days after Christmas it’s £12.99. How would you feel about that?” Infrastructure is also key. “If you’re a retail business, you have to have infrastructure; you cannot survive without systems, supply chain, warehouse and so on.”
The importance of infrastructure
Fashion pundits say that Superdry’s core demographic has aged and moved on while the brand has stagnated in the face of fierce competition from rivals Uniqlo, Zara and ASOS. Short of finding a distinct design direction, improving supply chain transparency and focusing on driving online sales could help turn the brand around.
Industry analysts suggest that the brand expanded too fast, diluting its exclusivity and thus its appeal. “We focused too much on the external world—our brand, consumers and stores—and didn’t pay enough attention to the internal world,” says Howe. “If you imagine your business as a balloon, then it needs air pressure, or infrastructure, to be increased as it grows. If it loses pressure, it is likely to implode. That is broadly what happened.”