Why Superdry and other big fashion names are quitting the stock market

Against a tumultuous backdrop of economic unrest and weakening demand, many public fashion companies – most notably here in the UK, Superdry – have opted to delist in an effort to revive their fortunes. What does this trend mean and will it deliver the positive results the brands hope for?

From wherever you’re sitting, fashion has had a turbulent 2024 so far. In-store retail is down, luxury is increasingly out of reach, and it was announced yesterday that Kering’s profits are set to plummet 40-45% by the end of the first half of the year. This tumultuous climate has meant one thing for many fashion brands and platforms: sink or swim.

To swim is to find solutions, quickly. And one such solution has been to privatise, meaning delisting the company and removing it from the stock market.

With stocks under pressure, luxury platform Farfetch has privatised as part of a deal formed last December, making it a subsidiary arm of Korean e-commerce company Coupang. Farfetch founder and CEO José Neves stepped down on 16 February as part of the deal, two months earlier than the original agreement of 30 April.

Farfetch quit NYSE following its acquisition by Coupang

Then, last week, UK fashion retail chain Superdry announced a major restructure of the business that included reducing store rents for 94 out of its stores, a fundraiser and of course, its decision to exit the London Stock Exchange. Its shares were last valued at 5.36 pence, falling 84% this year.

Looking forwards, Italian footwear brand Tod’s (who declined to comment at this time) has enlisted American multinational private equity fund L Catterton, with whom LVMH enjoys a “special relationship”, to help with its own privatisation. There is additional chatter that the Nordstrom family might also be delisting their eponymous US department store chain Nordstrom Rack.

So what can privatisation do for brands? The general consensus from a brand perspective seems to be that delisting will allow them to save their ailing business away from the beady eye of the public market.

Tod's may delist and is in talks with private equity house L Catterton

"It is very difficult to take the critical measures that the business needs whilst under the constant scrutiny of being a listed company,” Superdry co-founder and CEO Julian Dunkerton tells TheIndustry.fashion. “We are in a turnaround situation, which requires us to be swift and nimble in our decision making.”

“We need to be able to take the necessary steps to right size the business and I believe this is best done as a private company,” he continues. “Being listed creates a lot of onerous costs, including almost £5m being spent on annual audit fees [Superdry is currently valued at around £6m]. This is not sustainable for the business.”

Superdry’s equity raise, spearheaded by Dunkerton, consists of two options. Either an open offer to raise the equivalent of €8 million (£6.9m), or a placing to raise gross proceeds of £10m.

Erin Sarret, associate fellow in private markets and ESG at Oxford University’s Saïd Business School, explains that privatisation gives brands “more breathing and restructuring time”. “It makes sense to look for private capital to maintain one’s own interests in the company,” she says. This makes sense in Superdry’s case, as Dunkerton founded it from a market stall in 2006.

One senior director within the private equity space points out that when considering privatising, the lifecycle of the business is paramount. “Brands rely on consumer trends, which are not stable,” she explains. This is particularly true now with microtrends, thanks to the TikTokification of the trend cycle. “So all brands have a lifespan unless you can continuously throw money at maintaining their positioning.” She cites LVMH as the only company to continuously maintain its brand position.

“Superdry has reached a stage where it has become a ‘dad’ brand,” the private equity director continues (this is something which Dunkerton himself has acknowledged). “And dads don’t shop for clothes. The brand has not been proactively managed and sales aren’t getting replenished.”

Image: TheIndustry.fashion

“Superdry has an incredible brand, so the short termism of public shareholders make it impossible to calibrate any long term investment goals,” adds Saïd Business School's Sarret. “Private companies are able to have longer term goals.”

This is due to the public market being more heavily regulated. Privatisation allows restructuring (as Superdry is currently doing) to be carried out over a much longer time period. As Sarret explains, a public company might restructure in six to nine months, where a private company can set the end goal to two years in the future.

As the senior financial director explains, listed companies become “more about managing optics” and image “becomes extremely distracting for CEOs who have to be public facing but also run the business”. “It’s like they’re living two lives,” she says.

“Most of my time today is spent on non-core issues not relating to the brand,” says Dunkerton. “I need to be able to fully focus my attention back on retailing, building the brand, making sure the experience in-store is as good as it can be, and re-engaging fully with the customer.”

Though a necessary one for many, privatisation is still a risk. J.Crew was forced to file for bankruptcy in 2020, after being indebted by a leveraged buyout and having its most valuable assets syphoned away to its owners. This meant Covid was simply the straw that broke J.Crew’s back, hardly the sole reason for its demise.

“If a brand is struggling and their cash balance isn’t great, then it makes sense to get a buyer in who has deep pockets who can reposition the brand,” says the senior financial director. But she acknowledges the risks involved, especially when a brand has a volatile share price index, like that of Superdry.

“I want to do this, but before we can look to the future, we must get through this period first, ensure the restructuring plans go through and that the shareholders vote for both options offered,” says Dunkerton. “We remain focused on delivering the best outcome for shareholders, employees, and suppliers. I am still 100% committed to Superdry and am as passionate about the brand now as I have ever been."

A company’s reasoning for privatising will depend on its own specific circumstances. Superdry’s situation is different from Tod’s’, which is different from Nordstrom’s. Delisting will not save every company from administration, but if they want to avoid sinking, it might be the only buoyancy aid they have.