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

Superdry’s share price has been on a tear in the past week as recovery hopes set in, and I want a piece of the action.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

After falling 9% in 6 weeks, is this FTSE 100 stock now in bargain territory?

The BAE Systems share price hit a 52-week high on 3 June. Six weeks later, it’s down nearly 10%. Is…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

I love the look of Entain shares, potentially 47% undervalued

Many FTSE 100 companies have been on a tear in 2024, but with Entain shares down nearly 50%, I think…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Could Aviva shares reach £5.84 in the next 12 months?

Some analysts think Aviva shares could soar nearly 19% in the next year. This Fool takes a closer look to…

Read more »

Investing Articles

I’m looking at a once-in-a-decade chance to buy dirt-cheap FTSE dividend shares

Harvey Jones says FTSE 100 dividend shares have been showing signs of life lately but they're still cheap and there's…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

If I’d put £10k in BAE Systems shares 10 years ago, here’s what I’d have now

BAE Systems shares have been on fire over the last decade. But just how much would a £10k investment back…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

My favourite S&P 500 stock is still potentially 52% undervalued

The S&P 500 is where many investors look for the next opportunity, but one of my favourites might just be…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Here’s why I’m watching the Glencore share price

The mining sector has always been volatile, but with some recent strategic moves, I'm watching the Glencore share price even…

Read more »

Young black female footballer training on stadium pitch
Investing Articles

My JD Sports Fashion share price prediction for the second half of 2024

The JD Sports Fashion share price hasn't yet recovered from January’s slump. So will the retailer's stock bounce back in…

Read more »