The Superdry share price sold-off sharply this morning after the company posted a 56.8% fall in underlying full-year profit before tax. Revenue was largely flat on the year and the retail environment was described as ‘difficult’.

To make matters worse, the outlook for the fashion house doesn’t inspire confidence. The retail sector remains ‘highly competitive’, and the outlook continues to be ‘uncertain’. The firm has undergone major changes in 2019 in terms of management, and the business issues ‘will not be resolved overnight’. Despite the poor performance, the group is confident it's doing the right thing to return to high profitability. The fact that the dividend remains unchanged suggests that the company is confident in its ability to turn itself around, as the dividend is usually the first to go when a firm is fearful about the future.         

Pressure on the Superdry share price     

The Superdry share price has had a rough ride recently as a string of profit warnings and a major management shake-up chipped away at investor confidence. Many in the retail sector have complained about a fragile consumer environment, and the problems that Superdry are experiencing are making matters worse. A dreadful performance for the Superdry share price in 2018 prompted the founder, Julian Dunkerton, to get back involved in the company, after he stepped down from the board in the first half of 2018.

In April 2019, Mr Dunkerton was readmitted to the board of directors, which triggered a mass resignation of directors. Since the return of the group’s founder, the Superdry share price stabilised somewhat, but as this morning's results show, it remains under significant pressure.  

Superdry's profit warnings

In May, the group issued a profit warning – its third in a year. The fashion house had an underwhelming performance in the 13 weeks until late April as online and wholesale revenues dropped by 3.9% and 9.3% respectively. It is particularly disappointing that online sales are falling, seeing as there has been a huge surge in online sales in recent years – that’s the reason high streets are struggling. 

Superdry's strategy

Superdry has introduced a few changes to try and buck the trend of the poor performance. It will ramp up the number of products available online, and it will cut back on the number of unnecessary discounts. Offering promotions has been a popular strategy across the entire retail sector, but more often than not it's the customer who wins, and not the shareholder. It remains to be seen whether these changes will give the Superdry share price the boost it needs so much.       

View our Superdry annual results preview article.

 

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