During my teenage years, Superdry (LSE:SDRY) clothing items dominated my wardrobe. Times have changed, but I want to know if I should add Superdry shares to my wardrobe of stock holdings. Let’s take a look.
Superdry shares continue to fall
As a quick reminder, Superdry is a UK clothing brand with a focus on products combining vintage American styling with Japanese-inspired graphics. It has an extensive presence throughout the world, operating in 740 branded stores across 61 countries.
So what’s the current state of play with the Superdry share price? Well, as I write, the shares are trading for 144p. At this time last year, the shares were trading for 394p, which is a 63% drop over a 12-month period.
I believe Superdry shares have fallen in recent times due to the drop in popularity of its brand, coupled with the rise in online-based fast fashion alternatives. Furthermore, the demise of the traditional high street shopping experience, on which Superdry relies heavily with its bricks and mortar stores, has not helped.
The investment case
Let’s take a closer look at Superdry’s recent performance record. I do understand that past performance is not a guarantee of the future, however. It does not make for good reading, in my opinion. Looking back, I can see that revenue and gross profit has been falling for the past four years.
But what about Superdry’s recent performance? Well its last trading update was an interim report for the six months ending 23 October 2021 that was released in January. Revenue was down 1.4% compared to the same period last year. I did note some positive signs, with Superdry reporting a profit of £4m, compared to a loss of £18m last half-year period. Gross margin and earnings per share respectively also increased.
Superdry’s management has taken steps to combat the falling share price and ailing performance. Some of these included releasing five new capsule collections to refresh its offering. Next, it has decided to use sustainably sourced materials for over 30% of its portfolio of products. This should please ethical consumers and investors, especially with the recent rise of ESG investing in recent years.
Finally, Superdry is looking to increase efficiency and make cost savings in its warehouse operations through the use of robots for online operations. Some of these initiatives, if not all, could help boost Superdry shares in the longer term.
What I’m doing now
Everything considered, the negatives far outweigh the positives for me in respect of Superdry returning to former glory. I do understand that some of the steps it is taking will take time to yield tangible results and affect performance levels.
Superdry is competing in a saturated market against companies with better business models and a loyal brand following. It will need to work hard to return to consistent performance and growth, in my opinion.
Another worry is soaring inflation and the rising cost of raw materials. This could impact Superdry’s production process and squeeze profit margins. I would not buy Superdry shares for my holdings currently, although I will keep an eye on developments.
