Superdry sales race ahead despite snow disruption hurting stores in Q4
Superdry didn’t exactly deliver any surprises on Thursday with a trading update showing both strong revenue and earnings growth as the company continues to be one of the big winners in the under-pressure UK and global fashion sector.
But the update, covering Q4, the second half and its full year to April 28, didn’t quite read like one long triumphal procession as it suffered the same weather-related problems in Q4 as its rivals. Yet it still had plenty of news to make its retail peers envious. Just look at the headlines - annual global brand revenue was up 22.1% to £1.6 billion, wholesale was up 29.6% and e-commerce rose 25.8%.
It means full-year underlying pre-tax profits will come in between £96.5 million and £97.5 million, for another year of double-digit growth.
And its growth story should continue as the company extended its reach during the year with an entry into eight new markets via the wholesale channel, as well as the launch of new country-specific websites for the US and Switzerland.
Digging a little deeper, there was only one of the nasty surprises that can sometimes lurk in an apparently positive trading update, more of which later.
On the plus side, global brand revenue was very strong, as mentioned. This figure includes all retail revenue achieved for the Superdry brand, adding in the mark-up that wholesale customers put on the products, and it actually accelerated in the fourth quarter, as that full-year 22.1% rise turned into 23.3% for Q4.
But when it comes to revenue flowing directly to the company, the second half and Q4 were generally slower. Group revenue was up 16% in the full year to reach £872 million, but rose a lower 12.4% in the half year to £470 million and 12.4% in the latest quarter to reach £254.4 million.
While wholesale revenue in the full year was up almost 30%, it rose ‘only’ 25.6% in the half year but managed to recover a little for a 27.1% increase in Q4. Meanwhile e-commerce sales were up 25.8% for the year, 22.5% for the half year and only 18.2% for the fourth quarter.
And that nasty surprise? It probably won't come as a shock, but physical store sales were weaker than any other part of the business. They rose only 3.4% in the full year, but were flat in the half year and actually went into reverse in Q4, dropping by as much as 6%, despite the company having 13.5% more average retail space from which to sell.
Management seemed quite upbeat, talking up “the continued strong progress in Superdry's capital-light channels, wholesale and e-commerce.” And it said that it continues to benefit from the relative weakness of sterling.
It had a valid excuse for the problem in its stores too. It said that “store-based revenues remained under pressure [and] throughout the fourth quarter revenues were impacted by snow disruption in key markets and lower year-on-year average temperatures at the start of the Spring/Summer season.”
So it looks as if the underperformance of the stores could be a temporary blip, driven by heavy snow and a generally chilly start to the warm weather season, rather than any fundamental issue with consumers going off the brand.
And the company is working hard to make sure they don't go off the brand any time soon. It continues to strengthen awareness and perception of Superdry through its integrated digital marketing activity, collaborations and sponsorship “matched to the interests and passions of our consumers.” Its SuperdrySounds summer music festivals campaign reinforces “the brand's global positioning and creates a strong bond between Superdry, emerging music talent and our consumers' interest in music,” it said.
It added that its commitment as official clothing supplier to the UK delegation for the 2018 Invictus Games in Sydney generated significant media interest.
Superdry still sees major opportunities around the world too, as those new US and Swiss websites illustrate. The brand's development in China “remains in line with plan and underlying performance in the USA continues to be encouraging,” it said Thursday.
But, as highlighted previously, performance in the US store base continued to be hurt by landlord construction disruption affecting four existing stores and lower-than-anticipated tenancy levels in two key new locations. The disruption in these stores, plus accelerated investment in bringing its US wholesale operation in-house, has led the US business to make a loss of around £3 million rather than its previous guidance for a small profit in the full year.
So how will all of today’s news affect the year ahead? Superdry still expects to progress, albeit a little more slowly than in the past. During FY19 the company expects to generate high single-digit statutory revenue growth, led by double-digit growth in wholesale and e-tail, while “managing ongoing challenging conditions in stores.”
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