Fashion retailers across the FTSE suffered due to the pandemic. One such retailer is Superdry (LSE:SDRY).
FTSE AIM star or one to avoid?
Retail has been a risky sector in recent years. It has been well highlighted that the traditional high street is suffering and online-based fashion brands are excelling as technology evolves.
Superdry has over 750 stores across 65 countries. Nearly a third are owned by the company and the remainder are franchised. It is fair to say SDRY possesses a hefty physical footprint. Based on current shopping habits and a post-Covid 19 world, I believe this could be a major problem.
When the market crashed, SDRY lost a sizeable chunk of its share price like many other retailers on the FTSE. Pre-crash you were able to pick up SDRY shares at 515p per share. The lowest point of the crash saw its price hit 70p, which equates to a 85% drop. At the time of writing Superdry shares trade at close to 150p per share.
Superdry has not been without its problems in recent years. These include boardroom battles and profit warnings due to poor performance.
Recent performance and troubles
Rewind to 2012, two years after successfully being floated on the FTSE AIM. A profit warning and review of new stores opening was ordered. In 2014, founder and CEO Julian Dunkerton stepped down from his role. In 2018, Dunkerton won the right to be reinstated to the board, which saw four other board members resign with immediate effect. Boardroom battles always unsettle me despite how well a company may be doing.
Prior to the market crash, Christmas trading, which is seen as one of the retail industry’s busiest periods, was described as weak for SDRY. So much so, the FTSE AIM constiuent decided to issue a profit warning for the full year. The pandemic will have been a bitter pill to swallow as it will have prevented SDRY from recovering from the disappointing Christmas period.
Last week Superdry released a Q1 trading update. It confirmed full-year results could arrive next month. More importantly, SDRY announced that Q1 trading levels were better than initial expectations. With over 95% of stores now back open, the stricken retailer will be looking to recoup lost time and sales. Store revenue was down 58% compared to the same period in the previous year. SDRY’s e-commerce arm was thriving, up over 90% as operations began to normalise.
I am a fan of Superdry as a fashion retailer. It has done well to expand from humble beginnings in 2003 to its current size and operation. That said, it is not a share I would be interested in pursuing. Although it is priced dirt cheap, it has had too many issues in recent times with profit warnings and poor performance.
Consumers were already transitioning away from traditional retail stores towards online shopping prior to Covid-19. I believe this trend has been accelerated. Additionally, SDRY is seen as a higher end high street brand. There are lots of cheaper alternative brands for consumers too. Overall, retail is a sector I would avoid and will look to the FTSE for better alternatives.
The post Here’s my verdict on this well-known FTSE retailer appeared first on The Motley Fool UK.
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Jabran Khan 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 2020