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Superdry May Be in Need of a Comeback as Shares Plummet on “Weather” Woes

Superdry, the U.K. brand known for weatherproof outerwear, has issued its second profit warning in two months, and the company’s co-founder is calling for a comeback campaign.

The retailer saw its shares plunge nearly 40 percent Wednesday, losing roughly a third of their value, after it reported a 49 percent drop in profits. Superdry lowered the outlook for the second half of its FY2019 due to warm weather patterns that continued into November and December, the retailer’s biggest trading months of the year.

In a Nutshell: It’s the second time this year that Superdry has lowered its expectations based on weather-related losses, though it also blamed a “weakening, discount-driven consumer economy” for suppressing demand for its cold-weather clothing.

For November, Superdry expects to see a profit impact of around 11 million pounds ($13.89 million) and a similar loss in December if the weather continues to follow suit.

In April, Superdry announced a “transformation program” that was designed to increase innovation in warm weather product mix and ranging. It has plans to release a children’s wear range in Fall ’19 and will develop a licensing program it hopes will deliver an incremental royalty margin benefit by FY2022.

The company also said “considerable uncertainty” still exists regarding the weather outlook, perhaps a reference to the changing climate. That uncertainty also extended to the politic outlook for the British retailer, which is likely to be affected by the possibility of a less-than-ideal Brexit.

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Despite a strong performance during Black Friday Week, the brand amended its profit outlook to land somewhere between 55 million and 70 million pounds ($69.45 million to $88.4 million) which is below the previous market estimate of around 83.3 million pounds ($105.26 million), according to Marketwatch.

Sales: Global Brand revenue was up 6.4 percent in the first half of Superdry’s FY2019, at 831.8 million pounds ($1.05 billion) compared to the first half of FY2018 at 781.6 million pounds ($987.64 million). Group revenue was also up 3.1 percent to 414.6 million pounds ($523.89 million) compared to last year first half total of 402 million pounds ($507.97 million).

Earnings: Underlying profit before income tax was down 49 percent in the first half of Superdry’s FY2019 to just 12.9 million pounds ($16.3 million) compared to 25.3 million pounds ($31.97 million) in the first half of last year. This left underlying basic earnings per share at $0.15 per share, a loss of a little more than 53 percent.

CEO’s Take: Euan Sutherland, Superdry CEO, said the company had a challenging first half but that it has a plan to respond.

“In the spring of this year we started an 18-month product innovation and diversification program. This will increase choice for consumers around the world and address the current over-reliance on jackets and sweats,” Sutherland said. “We are accelerating into new categories and are particularly excited by the upcoming launch of Superdry Kids. At the same time, we are evolving the brand through targeted investment. In everything we do we will build on Superdry’s heritage of offering exceptional quality and design detail at outstanding value.”

“Superdry is responding to its internal challenges as well as a changing world and changing consumers,” Sutherland continued. “Our comprehensive transformation will ensure Superdry is well positioned as we optimize our routes to market and make our business more efficient. We are confident that our transformation program combined with the underlying operational strengths of the business will deliver a return to higher levels of growth and profitability while realizing geographic expansion opportunities and leveraging our multi-channel operating model to serve customers in whichever way suits them best.”