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Profits suffer at Superdry as it lags behind in ecommerce

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Unseasonably warm weather in November and December and good old Brexit are copping the blame, but Superdry’s disappointing results should be viewed through the lens of its yet-to-arrive digital strategy.

Brand revenues globally were up 6.4% to £831.8 million in the half-year to October 27, however underlying profit before tax was down 49.0% to £12.9 million.

In part this is down to poor weather and despite a strong Black Friday showing, and no one can deny that Brexit uncertainty is now having a demonstrable impact on sales, but the company itself identifies that its on-going transitional programme needs to kick-in to boost performance.

According to its trading statement “the challenges already being addressed by Superdry in terms of product mix and ranging were highlighted in the first half, with the unseasonably warm weather and a weakening, discount-driven consumer economy suppressing demand for the cold-weather clothing that has traditionally underpinned Superdry’s offer to consumers. Our focus is on re-energising product and evolving the brand, a process that started in April 2018”. 

This process involves a comprehensive transformation programme which is currently underway which is focussed around four key elements. The first an 18-month innovation and diversification programme to rebalance options across categories, including re-designing and ‘energising’ core products and moving into new categories outside of the ‘coats and sweats’ the brand has become associated with. It also includes developing a kidswear range to launch at the end of 2019. The company will also be creating a licensing programme and switching up to 100% organic cotton.

The second element involves strengthening the brand, says the company, with upweighted, targeted brand investment, giving customers additional reasons to buy Superdry. It is also looking to retain brand advocates and refresh its social media approach.

The third element revolves around improving margin through acceleration of sourcing from lower-cost, same quality Chinese producers, improved automation and looking at global licensing in beauty, footwear, watches, eyewear and accessories.

It is the fourth element is perhaps the most interesting, with the company looking to accelerat investment in capital light channels to increase global reach and drive sales growth. This will see Superdry invest in the growth of owned, B2B and partner ecommerce sites to service new markets and customer-centric mobile platforms, says the company. There is also, it believes, significant opportunities for wholesale-led growth in the US and China, delivering annual global brand revenue value of £400 million by FY22.

This fourth pillar is vital to Superdry’s continued success as new research by Mastercard last week suggested that 57% of consumer spending is now spent online, with almost half of this (27%) made up by spending on mobile devices, according to data from a pan-European survey of more than 18,000 people.

The shift to online commerce correlates with Mastercard’s own spending tracker: online shopping will see the strongest sales growth of the holiday season, up 11.1% year-on-year according to Mastercard SpendingPulse.

Euan Sutherland, Superdry Chief Executive Officer, explains: “In the spring of this year we started an 18-month product innovation and diversification programme. 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. At the same time we are evolving the brand through targeted investment. In everything we do we will build on Superdry’s heritage of offering exceptional quality and design detail at outstanding value.”

He continues: “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. 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.”

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