Superdry (LSE:SDRY) is a casualwear-focused clothing company that has struggled in recent years from the Brexit fallout, from Covid-19 and from various operating problems of its own making. But the Superdry share price is up nearly 6% today, as an accumulation of reasons brings positive sentiment to the UK stock.
Superdry’s share price rise
We’re only mid-way through the week, and already three former high street success stories have had to call in the administrators. Arcadia Group, Debenhams and Bonmarché are all reaching the end of the line, but none are down and out just yet. It’s not the first time any of these British retailers have collapsed into administration, but unless they can each agree on rescue deals for the brands involved, the latest filings could well be their last. Considering the year the sector has endured, it shouldn’t be a surprise to many.
The failure of so many retailers appears to have boosted others in the sector, perhaps because investors think they can shine in a less crowded market. Superdry is one of them. But the news that the Pfizer–BioNTech vaccine will start being administered in the UK next week could also be fuelling today’s positive sentiment. November saw a stock market rally across many unloved British stocks, in response to news of these imminent vaccines. This is another reason for the Superdry share price surging over 81% since November 1.
Still, the Superdry share price is 40% lower than it was this time last year. Revenue declined nearly 23% in Q2 and Covid-19 restrictions mean ongoing store closures. It cancelled its dividend earlier this year.
Too many discounts
While shoppers love a bargain, it doesn’t always pay for retailers to put things on markdown. This has been an ongoing issue for Superdry for some time now and discounting stock could wind up being the unravelling of the brand. The clothes are fashionable, comfy, colourful and practical. But consumers these days also like quality and often don’t mind paying for it. To discount too often can cheapen the brand and make it less desirable. So, there’s a fine line between a quality brand holding an occasional sale and heavily discounting stock all year round. Unfortunately, it’s the latter that Superdry’s guilty of.
Back in 2017, the company was riding a wave of popularity and profitability. The Superdry share price was heading for £20 and all was good with the brand. Fast forward and it’s been nothing but depressing headlines ever since. Superdry’s share price is now 85% lower than its early 2018 high, with a £237m market cap. With so much negativity stacking up against retailers, I don’t feel too confident about its future.
I don’t think Superdry is among the best UK shares to buy now, and as far as retailers go, I think there are stronger alternatives.
Kirsteen has no position in any of the shares mentioned. 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.