Has Superdry really got its strategy wrong or has the brand just run out of steam?
Superdry has been a British retail phenomenon. In under a decade, the brand went from its first store in Covent Garden to a huge multi-storey flagship on London’s Regent Street.
Established by James Holder and Julian Dunkerton, the Superdry name first appeared in 2003. It has been an unstoppable juggernaut since then, racking up yearly sales of over £750 million (2017) and operates in 55 countries.
At the beginning of this year, the remaining founder, Julian Dunkerton, announced he was stepping down from the company. In a statement, Dunkerton said he had “other demands” on his time, and stepping down was “the right point for me to transition my focus and responsibilities”. Leaving the business in the hands of chief executive Euan Sutherland (who took over the CEO reins from Dunkerton in 2014), Dunkerton bowed out quietly until this October when Superdry issued a shock profit warning blaming warm weather and bad foreign exchange hedging. Shares in the group crashed 20%.
Dunkerton has been vocal in his disagreement with the direction the company is heading in, saying, “I cannot sit back and watch my shareholding — and those off all the pensions invested in the company — be dissipated”. He’s trying to gather other shareholder support to return to and steer the company in his direction, but, have they got their strategy wrong or has the Superdry brand simply peaked and run out of steam?
“It has become unclear who Superdry is for and it feels like its brand and purpose has been entirely lost."
Mat Heinl, CEO, Moving Brands
Mat Heinl, CEO at global creative business Moving Brands, an independent, global creative company, says: “It has become unclear who Superdry is for and it feels like its brand and purpose has been entirely lost.
“There, now, seems to be a clear disconnect between what made the brand successful and its core base of customers. With the mid-market being hit hard by competitors, brands like Superdry fall into a sea of sameness,” says Heinl.
The strategy in question has been Superdry’s move into fast-fashion. In September, Superdry hired Brigitte Danielmeyer as its new chief product officer to launch a new fast-fashion range called "Superdry Preview”. Formerly Tommy Hilfiger’s global head of womenswear, Danielmeyer, leads the new Superdry Preview label aimed to attract a “younger, more fashion-driven” customer through limited-edition capsule collections. The range will go from design to delivery in just six weeks and be supported by a social media campaign targeted directly at 16 to 24-year-olds.
Yet to be tested, with no results yet for these ranges, Dunkerton thinks it’s a mistake for Superdry to move into the competitive fast fashion arena. He thinks Superdry should stick with fewer, core ranges in store and massively increase the designs and varieties (SKUs) being sold online.
“Last Christmas we were at a point where we could hit fast fashion online. We were such a strong brand that we could really increase our SKU count. But they [the new management] did the reverse.
“If you put that product online you would expand brand awareness and create excitement online while combining it with the classic store base.” he said.
Not everybody disagrees with the fast-fashion approach. Natalya Johnson, Marketing Manager, Shopest, who create location-based shopping experiences helping “independent stores to stay vibrant, profitable and nearby”, says: “Early on the brand appealed to their target demographic which at the time was young men and women aged around 16-30.
“Over time, their consumer has changed, developed new interests and shop in a new way. Although brand identity is strong, the brand has failed with adapting into the fast fashion cycles, meaning their products seem to be outdated,” she says.
“Superdry are beaten by big brands such as ASOS and Zara, who not only offer consumers constant variety, but also a difference of style.
“Superdry do have great potential to revive the brand, tapping into current trends in the fashion industry that would attract their ideal consumer. It seems that they keep missing the mark in trends that would complement the brand e.g. streetwear and also brand collaborations.
“Once the product becomes more relevant, the brand can offer new innovations in store and develop stronger marketing strategies. In conclusion, Superdry appear to be very stagnant at the moment, but definitely have the potential to make things right,” she says.
The shares now sit at roughly 780p. They began the year above 2000p. The October profit warning said it expected to make £83 million in profit this year, well shy of the near-£110 million expected.
Superdry is heavily reliant on sales of heavy winter items such as jumpers and jackets, making 45% of annual sales. It said “unseasonably hot weather” in the UK, Europe and the east coast of the US was hitting sales.
“Superdry is a British phenomenon who’s growth has been nothing short of miraculous.”
Anthony McGrath, Lecturer and Editor-in-Chief of Clothes-Make-the-Man.com
“Superdry is a British phenomenon who’s growth has been nothing short of miraculous,” says Anthony McGrath, Lecturer and Editor-in-Chief of Clothes-Make-the-Man.com.
“In their heyday, celebs galore were spotted in their trademark casual wear and they set up home in a huge flagship emporium dedicated to all things Superdry on the retail Mecca of Regent Street. BUT! They have rested on their laurels and the whole nature of the beast, that is fashion, is that it changes at a break neck speed. Tastes, styles, trends change and unfortunately Superdry haven’t. So, yes, I do think Dunkerton is right,” he says.
Dunkerton, who retains an 18.5% stake, said: “The management team remains hell-bent on their strategy, publicly supported by the chairman; but the numbers and the market warnings speak volumes. It is very clear that the company needs to change strategic direction; I have a clear and simple plan to correct the problems, and I have been explaining my plan to shareholders over the last couple of weeks.
“This company and brand has such a great opportunity - we must grasp it now,” he said.
This added pressure onto the Superdry management comes at a time when the retail landscape is looking schizophrenic. Long one of the darlings of the British retail scene, could this just be a case of the brand losing momentum and consumers growing tired of the Superdry brand regardless of the strategy? Has the ubiquitous Superdry branding reached its zenith, and, regardless of what the brand does, exponential growth can’t go on forever?
“Another challenge for brands like Superdry is the rise in people turning away from highly disposable and consumerist brands as they become aware of the massive pollution and poor working conditions associated with those brands which emphasise profits over ethical business practices,” says Heinl.
“To claw back momentum, Superdry, and other struggling brands, could do a number of things to help them stand out in a crowded marketplace. They could become a champion of sustainable fashion, improve and showcase high quality products, define a distinct design direction or take a leadership position in improving supply chain transparency and quality,” he says.
"There are too many products in the stores with short shelf life. You shouldn’t try and change it all the time. Get the product right and be confident in it."
Julian Dunkerton, founder, Superdry
Dunkerton said: “My model means less wastage. It is far easier to manage and you have lower stock risk.
“There are too many products in the stores with short shelf life. You shouldn’t try and change it all the time. Get the product right and be confident in it. There’s no reason a jacket in October shouldn’t stay until March. Now, you see jackets on sale already. Can that be right?” he says.
Shareholder Aberdeen Asset Management is supporting current management, saying Dunkerton had to hand the CEO reins to Sutherland after multiple profit warnings.
Sutherland himself has said “it will take up to 18 months for the benefits to come through” from the new strategy and Superdry chairman Peter Bamford added: “The Board of Superdry has huge respect for Julian Dunkerton as an entrepreneur and founder of the business. Julian has raised a number of issues with the board regarding strategy since he left the business. We have reviewed and discussed these issues and, while we have sympathy with some of his points, we have a different view on the best strategy or approach to addressing them.
“Superdry is an ambitious, global, multi-channel brand and the Board believes that Julian’s view of strategy has not evolved with the needs of the business. We remain fully committed to our successful global digital brand strategy and the board is confident that Superdry has in place the right leadership to ensure the continued development of our highly relevant brand.”
The management will have to start seeing the fruits from this new strategy and fast, otherwise shareholders will push for change. The next set of results will either quieten Dunkerton or add fuel to the fire for a reversing of the company direction. Superdry is too reliant on coats and jackets, but this has also helped them grow to the size they are. Regardless of strategy, what if consumers are simply bored with Superdry? That’s going to be an even harder job to fix.