Superdry braced for £100m hit on pricey leases and cost of old stock

SUPERDRY founder Julian Dunkerton will launch his blueprint to turn the fashion firm around this week when he is expected to include a significant writedown to account for poorly performing shops.

City analysts said the result could be a hit of more than £100million, which would take the company into a loss for the financial year.

The writedown is a largely paper loss that should not affect the company’s ongoing health.

The move comes as dozens of retailers announce plans to close stores as shoppers shift online.

In a report to its clients, stockbroker Liberum backed Dunkerton, who seized back control of the business three months ago, saying his plans were an ‘opportunity not to be missed’ for the firm.

‘We would advocate management take a bold and determined approach,’ said Liberum analyst Wayne Brown.

He said the total writedown could be ‘between £100 million and £200million’, which will include a possible hit for the cost of old stock.

There are 734 stores in the Superdry portfolio both in the UK and overseas – including 248 that the company owns and manages.

Superdry is expected to announce on Wednesday that its underlying profit is around £42million.

Brown said a reinvigoration of the company strategy could more than double profits to over £100 million in four years’ time if Dunkerton’s plans work.

The company was scheduled to announce its full-year report last week but delayed it by six days due to ‘the complexity of the work’ related to ‘non-cash onerous lease and store impairment provision’.

It is understood that Dunkerton is preparing to announce a raft of new initiatives to improve the brand’s fashion credentials.

These are expected to include speeding up the arrival of new designs in his shops from factories, reducing heavy discounts and putting his business partner James Holder’s SuperDesign Lab back at the centre of the organisation.

Part of the plan includes shifting production from China to factories nearer to Europe, possibly including Turkey which is known for its expertise in denim.

Dunkerton announced his intention to leave the business in March last year. But in April this year he staged an audacious coup after campaigning with investors for six months to install himself back on the board. In an interview with The Mail on Sunday, days after he took back control, he said the speed of his return was a ‘huge benefit’.

‘The reality is, I’ve seen glaring mistakes and I’m in the process of rectifying them already,’ he said at the time.

His return prompted Peter Bamford, who was chairman, and Euan Sutherland, chief executive, to bail out.

But last week, Superdry added ballast to its depleted board with two financial heavyweights. Helen Weir, former Marks & Spencer finance director, was appointed senior independent director and Alastair Miller, former New Look finance chief, also joined as a nonexecutive.

Superdry has already announced sales in the year to April were £872 million.

Liberum said that it was ‘a very positive sign’ that no senior members of staff had followed the board out of the business. Brown added: ‘Management teams rarely get the opportunity to rebase businesses and we think this is one of those that should not be missed.’

Backing Dunkerton, Brown said: ‘The magnitude of any forthcoming writedowns should not get in the way of seeing the long-term opportunity and why this would be the time to buy.’

Superdry shares were trading at £12.43 a year ago. They closed on Friday at £4.55.

John Stevenson, at stockbroker Peel Hunt, said: ‘We expect Mr Dunkerton to expand on his recovery strategy for the business and provide a more detailed framework on how quickly this will take to come through.

‘Some areas of improvement in terms of in-store merchandising, stock flows and online changes are likely to be underway. It is the ability to influence ranges that will take longer to come through.’