Fashion retailer Superdry (SDRY,) saw shares tumble this morning as the company withdrew its existing profit guidance of "broadly breakeven" for the financial year in a trading statement released today.
In slightly better news, London-based footwear brand Dr. Martens (DOCS,) told investors today that strong direct-to-consumer growth drove its revenue increase, but expects higher costs to impact its full-year results.
Superdry, whose sales had been impacted by the cost-of-living crisis and poor weather driving lessening demand for summer clothes, said that FY23 revenue is now expected in the range of £615m to £635m.
As part of its turnaround plan, the retailer has identified initial cost savings of over £35m, achieved through estate optimisation, logistics and distribution savings, better procurement, and continued range reduction. The company expects these savings to be fully realised by the end of FY24, with the costs to achieve them primarily incurred in the calendar year 2023.
Julian Dunkerton, Founder and Chief Executive Officer, said: “The Superdry brand continues to evolve but there is no doubt that the market conditions we face are challenging, compounded by the issues we have previously disclosed and are working to address in Wholesale. As a result, while we continue to deliver like-for-like growth in retail sales, we need to ensure our business is in the right shape to navigate these difficult times, which is why we are looking hard at our cost base.”
Dr. Martens reported a 10% increase in full-year revenue with a 6% revenue growth in the final quarter of financial 2023, falling short of the January guidance of 11-13%.
The boost in revenue was driven by strong direct-to-consumer growth in Europe, Middle-East, Africa, and Asia-Pacific regions, although wholesale revenue fell by 4% in the final quarter due to operational issues at the Los Angeles distribution center and shipment reduction to its China distributor.
The associated costs with the LA centre were £15m, higher than the expected £8m-£11m, affecting full-year earnings, which are now expected to be around £245m, down 6.8% from £263m and below the initial guidance.
Despite the challenges, the company said it has made good progress in resolving the issues at the LA center, and shipment volumes are now back to a normal level.
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An overall mixed bag of results from Superdry and Dr. Martens, reflecting the challenges that retailers are facing in the current economic climate, namely, supply chain disruptions and inflation impacting profitability.
Superdry's recent announcement highlights how the positive retail sales momentum experienced over the Christmas period has not held up in the following months, as the rainy weather in February and March has subdued consumer demand, resulting in a disappointing performance of its spring-summer collection.
On top of this, as the cost-of-living crisis persists, budget fashion brands are outperforming more premium retailers, as consumers look to cut costs where possible, with a recent survey concluding that one in four Brits are reducing spending on new clothes and accessories amid efforts to tighten budgets.
Still, investor confidence might return for Superdry, as it sets plans in motion to achieve long-term cost savings through its store estate and logistics. In addition, despite Dr. Martens experiencing higher costs due to operations issues at its LA distribution centre, the company said that shipment volumes are back to ‘normal levels.’ The consumer growth in the EMEA region is also another reason for Dr. Martens to look ahead optimistically, as the company said it looks forward to giving more details when it releases full-year results in the coming months.
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