Superdry half-year profits drop by 49%
By Elias Jahshan - Dec 13th 2018, 10:13
Superdry has revealed a massive drop in underlying profit in its interim results despite an uptick in overall revenue, as the fashion retailer conceded it had a “difficult first half”.
For the 26-week period ending October 27, underlying profit before income tax was slashed by 49 per cent year-on-year, from £25.3 million down to £12.9 million.
However, the British retailer pointed out that statutory profit before income tax for the first half skyrocketed 190.1 per cent to £26.4 million, up from £9.1 million from the same time last year and reflecting the fair value movement on forward exchange contracts.
Additionally, as stated in its recent preliminary report, Superdry recorded a 3.1 per cent year-on-year uptick in overall group revenue for the first half, coming in at £414.6 million.
The overall revenue was boosted by a 7.8 per cent increase in wholesale to £171.8 million while ecommerce revenue grew by 6.9 per cent to £65.4 million – underpinned by 14 per cent growth from the company-owned ecommerce site.
Bricks-and-mortar retail dragged Superdry’s overall revenue though, with sales dipping 2.3 per cent year-on-year from £181.5 million to £177.4 million.
Meanwhile, Superdry’s global brand revenue grew 6.4 per cent year-on-year to £831.8 million, or 7.4 per cent to £850.2 million if including its Chinese market.
Basic earnings per share also grew year-on-year from 9.7p to 24.7p, but underlying basic earnings per share plummeted from 25.8p to 11.9p. Interim dividend held steady at 9.3p.
Superdry chief executive Euan Sutherland said the business endured a “difficult first half” thanks to unseasonably warm weather across its major markets and a consumer economy that was increasingly discount-driven.
He highlighted there had been issues in Superdry’s product mix and range, but the retailer was currently addressing that with a strategy that would cut reliance on jackets and sweatshirts and introduce more dresses, skirts, women’s tops and denim, as well as expanding into premium, sports and licensed products.
Sutherland also used today’s interim trading update to announce Superdry’s expansion into kidswear.
“In the spring of this year we started an 18-month product innovation and diversification programme,” he said.
“This will increase choice for consumers around the world and address the current over-reliance on jackets and sweats."
“We are accelerating into new categories and are particularly excited by the upcoming launch of Superdry Kids.”
He added: “Superdry is a strong brand and has strong operational capabilities. We are focused on an intensified transformation programme to reset the business and address the legacy issues we face, particularly in product mix and range."
“Superdry is responding to its internal challenges as well as a changing world and changing consumers."
“Our comprehensive transformation will ensure Superdry is well positioned as we optimise our routes to market and make our business more efficient."
“We are confident that our transformation programme combined with the underlying operational strengths of the business will deliver a return to higher levels of growth and profitability while realising geographic expansion opportunities and leveraging our multi-channel operating model to serve customers in whichever way suits them best.”
Looking ahead, Superdry reiterated its profit warning for its full-year after a lacklustre start to the second half throughout November and into December – its two biggest trading months in the year.
“Given Superdry’s reliance on cold weather-related product continues and a lack of innovation in some of its core categories, sales have remained under pressure despite a strong performance in the Black Friday week,” the fashion chain stated.
“This has resulted in an adverse profit impact of around £11 million in November and the company expects a potentially similar profit impact in December if trading conditions do not improve."
“There is still considerable uncertainty in terms of the weather outlook, the changing shape of consumer behaviour in the peak trading period and the impact of wider economic and political uncertainty.”
The retailer said that for the remainder of the financial year, it expected underlying profit before tax to be in the range of £55 million to £70 million.
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