UK markets closed
  • NIKKEI 225

    29,291.01
    -150.29 (-0.51%)
     
  • HANG SENG

    28,436.84
    -201.69 (-0.70%)
     
  • CRUDE OIL

    72.00
    -0.12 (-0.17%)
     
  • GOLD FUTURES

    1,847.50
    -8.90 (-0.48%)
     
  • DOW

    34,054.24
    -245.09 (-0.71%)
     
  • BTC-GBP

    27,565.66
    -1,915.85 (-6.50%)
     
  • CMC Crypto 200

    958.67
    -33.80 (-3.41%)
     
  • ^IXIC

    13,975.05
    -97.81 (-0.70%)
     
  • ^FTAS

    4,088.47
    +5.27 (+0.13%)
     

The 1 retail stock I’d buy now with £1,000

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
Man in a clothing store in a medical mask because of a coronovirus.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

The Superdry (LSE: SDRY) share price has performed astonishingly well this year, despite mediocre company performances. In the past 12 months, its stock has risen more than 250% from 130p to 450p. I believe that it can move higher, which is why, if I had £1,000 today, I’d invest in this stock.

A look at Superdry’s financials

Financially, it was not the most successful year in Superdry’s history, leading some to speculate on whether its nascent recovery would continue or not. Releasing a trading statement for the financial year to 24 April last week, we saw how its performance was it hard. Revenue fell 21% year-on-year (YoY) from £704m to £557m. Store-generated revenue took the brunt of this, falling 51% from £287m to £141m, due to obvious, Covid-related, reasons.

However, most retailers suffered in the past year and Superdry still had its e-commerce card to play. Online retail sales grew 34% to £203m, from £152m a year ago.

CEO Julian Dunkerton was impressed with this e-commerce performance, saying the strengthened e-commerce presence helped mitigate the impact from enforced store closures.

He also said the firm returned to revenue growth in Q4 — which was an important development — and its full-price stance over the period meant a “significant online margin improvement”.

And of course, revenue generated through online retail will be supplemented by the reopening of stores nationwide as lockdown easing continues.

Superdry’s share price performance

Last Thursday, Superdry stock soared 16% following its update for FY21. With revenue falling, I could be asking myself why?

Well, as explained above, e-commerce holds a lot of promise for the company, as does the ongoing economic reopening. What’s more, Q4 2021 was a promising preview of what that economic reopening means for the business moving forward. Group revenue for Q4 increased by 0.8% to £118m, with a 26.6% rise in e-commerce sales and a 13.5% rise in wholesale offsetting a 51.5% drop in store sales.

And despite its dramatic full-year drops in revenue, company liquidity remained strong. Net cash came in at £39.4m vs £36.7m in the previous year.

My biggest concern about Superdry’s share price

Fashion is a tough industry and product missteps can devastate sales. The rise of pure-play online retailers, such as ASOS, has provided Superdry with stiff competition. This has also posed a threat to the power of its brand, which is not quite what it used to be, in my opinion. Should Superdry be unable to buck its current long-term downward trend, it may have further to fall.

Growth potential

Yet I have been very impressed with Superdry’s ability to get through Covid-19 and remain liquid. Despite such heavy revenue losses, the fact that it can maintain positive cash flow and boost its online segment presents a lot of hope for its long-term potential.

And with Superdry’s share price currently just a fraction of its five-year-high (2,074p in January 2018), I believe its potential to return to those heights would make it a worthy investment for me if I had £1,000.

The post The 1 retail stock I’d buy now with £1,000 appeared first on The Motley Fool UK.

More reading

Jamie Adams holds no position in Superdry. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021