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CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

Superdry shares fall sharply after CEO Julian Dunkerton rules out making a takeover offer

After two months of talks, hope for a rescue deal is diminishing.

superdry Source: Bloomberg

Superdry (LON: SDRY) shares were changing hands for as much as 472p in mid-2021, but the once-lauded retail stock has cratered to less than 10p — as a perfect storm of inflation and company-specific issues potentially drive the company closer to a conclusion.

Superdry shares: financial position

Half-year results to 28 October 2023 saw group revenue fall by 23.5% year-over-year to £219.8 million, driven by ‘by the challenging consumer retail market, unseasonal weather, as well as the underperformance of our Wholesale segment.’

While statutory profit before tax did come in at £3.3 million, up from a £17.7 million loss in the same half the year before, this was mostly attributed to the sale of intellectual property in the APAC region, itself partially by a non-cash impairment charge of £10.2 million.

This weaker revenue income impacted on profitability — leaving the company with an adjusted loss before tax of £25.3 million, nearly double the loss of the comparable period.

However, Superdry is attempting to implement a turnaround, with a plan to save more than £40 million in savings in the financial year — and with HY24 inventories down by 24.2% to £130.9 million, with ‘FY24 closing inventory projected to reach c.7m units, down from a peak of c.18.9m units at FY 19.’ It also took action post period to dispose assets in South Asia for net £28.3 million.

Superdry also highlighted cash management as a ‘critical focus area,’ and also noted that milder weather and heavy discounting across the sector impacted the all-important Christmas trading. For context, in the 12 weeks post period to 20 January 2024, revenue also fell year-over-year by 13.7%.

With questions hanging over its future, late January saw Superdry forced to respond to press speculation — noting that ‘it is working with advisors to explore the feasibility of various material cost saving options. Whilst there is no certainty that any of these options are progressed, they aim to build on the success of the cost saving initiatives.’

Dunkerton rules out making an offer

Superdry recently announced that it has agreed an extension and increase to its secondary lending facility with Hilco Capital — by six months to 7 February 2025 and will see an additional £10m made available immediately and a further £10m available for the working capital peak between September and November, subject to the approval and implementation of cost saving measures.

However, the interest rate was set at 11.5% plus the Bank of England base rate on the drawn element, which would be 16.75% at present.

Worse, the business announced on 28 March that CEO and founder Julian Dunkerton ‘does not intend to make an offer for Superdry’ after two months of talks, as it would be ‘unlikely to deliver an outcome for shareholders, or stakeholders more broadly, that the Transaction Committee and Julian Dunkerton are confident can be executed in the context of the Company’s ongoing work on its turnaround plan and material cost saving options.’

While alternative discussions remain ongoing, including a possible equity raise underwritten by the founder to provide addition liquidity headroom, Superdry noted this would be ‘at a very material discount to the current share price’ and also be conditional on delisting.

Accordingly, Superdry shares have again fallen sharply to a record low. For context, Dunkerton — who retains a 20% stake — saw Superdry rise to become one of the best success stories if the high street a few years ago. He left the company in 2018, but then forced his way back on to the board a year later.

However, Superdry is not the only chain to struggle. Both Ted Baker and Muji have recently called in administrators as costs rise amid falling demand.

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