A series of mistakes and tension among stockists over its retail strategy have made it a tough year for SuperGroup. Despite remaining a best-seller, it must work to restore its credibility.
After four years of growth, SuperGroup last week announced its sales had slowed, with chief executive Julian Dunkerton describing the three months to April 29 as a “disappointing end to a challenging year”.
SuperGroup, which owns young fashion brand Superdry and the Cult retail chain, saw total sales rise 14.1% to £75.2m, but on a like-for-like basis sales were flat. The latest results underline a tumultuous year, with the business suffering from shortages of stock and sizes across UK stores during the implementation of an IT systems upgrade at its warehouse in Barnwood, Gloucestershire, last autumn.
Then, last month, SuperGroup warned it would have to cut its full-year pre-tax profit by £7.5m because of a mathematical error on the wholesale side of the business, where a plus sign was entered rather than a minus.
The wholesale division has borne the brunt of the problems at SuperGroup and in the latest figures sales rose just 4.4% to £35.8m compared with the same period last year. In its latest results, the company admitted the expansion of its UK retail business has affected wholesale performance. As a result, Superdry stockists have voiced concern about the brand’s expanding retail presence and its strategy of selling at reduced prices on eBay, while analysts warn it will take time for the brand to rebuild credibility.
Mark Photiades, retail sector analyst at Singer Capital Markets, says: “The UK wholesale business is diminishing quite a bit. As it opens more of its own stores in the UK, the amount of stock going into third parties such as Next and Bank is reducing because it is cannibalising its own stores.”
One indie stockist says he had not previously stocked the brand due to the close proximity of a Superdry store. “The wholesale starts [the business] and they think the retail side is easy,” he adds.
Though Dunkerton has pledged support to indies, he says he is not considering a new brand or range exclusively for stockists.
Dunkerton told Drapers: “I would like to be more supportive to all our wholesale accounts going forward. It is just making sure that we allow wholesale accounts to benefit from the work we are doing in the company.”
The tension between SuperGroup’s wholesale and retail arms has been intensified, not just by the group’s own 79 UK stores, but also with the expansion of outlet stores.
Superdry trades from nine outlets including eBay, having opened four during the year, and says the channel provides the opportunity for managing stock levels in a profitable manner.
Some stockists are worried that consumers will instead choose to buy cheaper product from eBay and off-price stores like premium discount shopping destination Bicester Village.
Dunkerton responds: “I think a wholesale customer would be more worried if the outlets that we owned went on Sale rather than the nine outlet stores. I think it’s a very effective way of keeping everyone happy.”
The owner of one indie, which sells full-price Superdry products in-store and online via eBay and its own website, says the brand has asked him to stop selling Superdry stock from his own eBay store, something he is reluctant to do.
“It’s one of my best avenues for selling it. If they are going to start pulling tricks like this and selling stock on their own website cheaper than they are selling it to us, then people are going to think, what’s the point in selling it?” he says.
Despite these issues, some stockists told Drapers that Superdry continues to sell well. A buyer from one young fashion indie says it is its best-selling brand, with windcheaters the store’s best-seller. “I don’t know what to do [about stocking it in the future] because it has slowed down, but there is no other massive brand out there which is on a par,” he says.
With indies reporting that no other brand performs as well as Superdry, speculation over its future may be premature. But another stockist says while it remains a top choice for shoppers it doesn’t have strong design handwriting: “It doesn’t look different from what everyone else is doing. That’s the main problem.”
Peel Hunt retail analyst John Stevenson says the brand may move away from a heavily logoed look as the young fashion market has begun to favour less overt brands. “The new ranges are very good. A lot of the short-order spring stuff is much less overtly branded.”
But analysts agree SuperGroup could see growth, particularly with overseas expansion and UK retail growth. “I don’t think it’s dead,” says Photiades, “but from a market point of view there is a lot of credibility that needs to be built.”