City analysts have warned Superdry that “speed is of the essence” if it wants to survive after the fashion retailer issued a profit warning and announced it was exploring an equity raise of 20% earlier today.
Superdry said in a statement that it is considering an equity raise of up to 20% to “further strengthen its balance sheet”, which is “fully supported” by boss Julian Dunkerton.
The fashion retailer said it had withdrawn its previous full-year profit guidance of “broadly breakeven” and now expects full-year revenue to be between £615m and £635m.
The fashion retailer reported that sales have shown good like-for-like growth, despite being slower than expected in a “challenging trading environment”.
Following the announcement, Investec retail analyst Kate Calvert told Retail Week: “The problem they’ve got at the moment is twofold: they need some cash to execute the cost-reduction programme, and they are getting that coming in, but because it has to go through a shareholder vote, there is a timing issue in terms of the cash coming into the business.
“The reality is that they are trying to reposition the company in a very difficult market environment. They have had some success in terms of improving the product offer and that can be seen by the fact retail sales are seeing good like-for-like growth.
“The problem they’ve got is that the growth hasn’t been high enough.”
Calvert says Superdry tried to use promotions to generate cash but that did not pay off in regard to higher sales or volumes, resulting in some margin pressure for the retailer.
While details of what the cost restructuring will look like remain patchy, Calvert expects that Superdry will seek existing or new financial investors for backing.
“They’ve got cash coming in that can tide them over for longer, but ultimately do they have enough? They could recover much more quickly if there was a more positive consumer backdrop, but speed is of the essence,” she said.
Peel Hunt retail analyst John Stevenson said that, while numbers are slightly behind what Superdry is looking for, he thinks the cost savings will get the retailer back to decent levels of margin and back into cash generation.
Despite saying the brand is “alive and well”, Stevenson did question when Superdry might be able to return to growth.
“The question is can they be profitable and cash-generative and get back to margins they had previously?” he said. “The challenge there is very much around right-sizing the cost base to be right for the business going forward.”
This will be the second time in six months that Superdry has looked to refinance after reports that the fashion retailer was seeking a refinancing loan of up to £70m from Bantry Bay Capital in November last year.
- Get the latest fashion news and analysis straight to your inbox – sign up for our weekly newsletter