Superdry (LSE:SDRY) is a UK clothing brand that has been listed for over a decade. After gaining traction and expanding rapidly, the company has struggled in recent years to remain at the forefront of its industry. This has been reflected in a share price that’s down 77% over a five-year period, although it’s up 131% over 12 months. But today, the Superdry share price has rallied after an update came out for the full-year. Is this the start of a turnaround?
Full-year trading update
The trading update covered the last 12 months, from the end of April 2020. It revealed that revenue fell by 21% to £556.6m from the previous year. I need to wait for the published full-year results to see how this has impacted the bottom line, but I imagine this will lead to a loss for the year.
After all, the previous year also saw a fall in group revenue of 19.2%, leading to a loss of £166.9m. Although the figure included a large store impairment charge, it would still have generated a loss even without that extra pressure. This followed another loss in 2018, explaining that five-year Superdry share price fall I mentioned earlier.
But let’s put that to one side and focus on the most recent trading update. Why did revenue fall? It’s no surprise that the pandemic had a large impact here. Superdry estimated that 39% of store days were lost due to closures. Even with a strengthened online presence, this was the key reason for the negative result.
My outlook for the Superdry share price
So with those lost trading days and the revenue hit, I might wonder why the Superdry share price rallied so much today. But not all of the trading update was negative.
in fact, Q4 actually saw small revenue growth of 0.8%, and e-commerce sales also grew in double-digits. CEO Julian Dunkerton said that “our strengthened e-commerce presence has helped mitigate the impact from enforced closures of our stores”. This growth in e-commerce has been seen in other companies as well. For example, I noted the surge in this area when I covered Burberry recently.
So the rally in the Superdry share price can be put down to the more optimistic outlook for the company, with the last quarter potentially showing that a corner has been turned. This also ties in with easing lockdown restrictions this month and next month, which should allow Superdry stores (at least in the UK), to trade without hindrance.
The company also showed that it has good liquidity, despite the hard times. Net cash came in at £39.4m (vs £36.7m in the previous year).
Product initiatives also seem to be working with the company saying its neymar Jr link-up has “resulted in record engagement rates, with two million engagements in the first three weeks across our owned channels”.
One risk I see for the Superdry share price is the longer-term downward trend it has seen. For several years, revenue has been falling as consumer demand shifts. Fashion is a fast-paced industry and Superdry doesn’t seem to be the hot brand it once was.
So even with a potential good bump from store reopening, I still wouldn’t buy for now. I struggle to see how the share price can regain levels seen in previous years, so will opt out and watch from the sidelines.
jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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.