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Like many listed retailers, Superdry (SDRY) has been falling out of fashion as inflation and rising living costs threaten to disturb the post-pandemic rebound. This is the latest struggle that has faced the faux-Japanese clothing brand, which is attempting to recover after a three-year stint of posting annual losses.
Superdry’s difficulties first came to light in 2018 after a boardroom tiff led to the temporary removal of co-founder and chief executive Julian Dunkerton. Despite his return to the business in 2019, shares have continued to fall, now resting below a tenth of their value four years ago.
Since then, Dunkerton has pioneered a “premium” revamp to mend profitability, by steering away from discounts and increasing full-price sales. The signs have been promising so far. The apparel retailer swung to a £4mn half-year profit to October 23, compared with an £18.9mn loss during the same period last year, thanks to higher in-store sales.
However, investors remained unmoved by these green shoots of recovery in its latest trading update, with shares continuing to fall in line with sector-mates Joules (JOUL) and Ted Baker (TED), whose low valuation has spurred takeover bids from private equity.
Superdry’s forward PE of 8.5 makes shares “look extremely cheap”, according to broker Liberum, which expects the retailer to return to profit in 2022.
The valuation and turnround progress could be behind Dunkerton’s recent £1.15mn share purchase, with the co-founder buying 805,172 shares at an average price of £1.42 each. Dunkerton has steadily increased his stake in recent years, having spent £1mn on two bulk purchases in October 2021, on top of a £1.5mn buy-in a year earlier.
Investors may have appreciated this vote of confidence, as shares gained 7 per cent in the week following Dunkerton’s latest purchase.
Hostmore heads get Fridays feeling
Although Hostmore (MORE) operates restaurants selling the idea of all-American fun, things have been pretty miserable for its shareholders since its stock market listing in November last year.
The Edinburgh-based company’s shares debuted at 150p following a demerger from former owner Electra Private Equity but have been sliding ever since.
Hostmore owns the UK rights to the TGI Friday’s franchise, which has been rebranded as Fridays. It operates 89 restaurants, mostly under the Fridays brand but three cocktail-themed outlets trade as 63rd+1st, after the Manhattan corner where the first TGI Fridays opened in 1965.
Fridays has had a presence in the UK since 1986, initially under Whitbread’s (WTB) ownership. Most (68 per cent) of its sites are now based on retail parks or in shopping centres.
Its prospectus made much of the opportunity to recapture a bigger share of a casual dining market hit hard by the pandemic. For instance, competitor The Restaurant Group (RTN) used a company voluntary arrangement agreed in 2020 to close 125 sites, most of which operated under competing American-themed brand Frankie & Benny’s.
Yet even with fewer rivals around, business has been tough. Hostmore reported a £1.6mn loss in the 53 weeks to January 2 despite a 23 per cent increase in revenue to £159mn. A trading update for the 20 weeks to May 26 said revenue was 6 per cent lower than pre-pandemic levels due to the “more challenging” consumer environment. Full-year sales are likely to be 8 per cent lower than in 2019, while a 10 per cent jump in food costs is putting additional pressure on margins.
Hostmore’s steep share price fall means the company’s market capitalisation has now slipped to £52mn, or less than half of its net asset value of £125mn in January.
The directors clearly feel the sell-off has been overdone. Between them, chair Gavin Manson, chief financial officer Alan Clark and non-executive David Lis bought more than £228,000 of shares in the week ending June 3, with Clark purchasing a further £42,000 of shares on June 6.
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