What’s going wrong at Superdry?

Bad news for Superdry, one of the most popular young fashion chains in the UK, which has suffered a huge knock. The firm’s owner, SuperGroup, saw its share price plunge 40% on Friday after a shock profit warning. And it’s not just investors who are losing faith. Fashionistas say the Superdry brand, which burst on to the scene in 2004 with its vintage Americana look topped off by Japanese script, is looking tired. This story combines accounting, finance, fashion, marketing and stock control.

If you know about the product life cycle, you’ll be well aware that products tend to have a finite life span. And in the world of fashion, that can be very short. According to an industry source quoted in The Guardian, “the last brand that captured the mainstream British public in that sloganeering way was FCUK. Superdry have taken over from them, but the market tires easily and moves on.”

The first Superdry shop opened in London’s Covent Garden in 2004, and the chain grew rapidly to 80 UK shops and 70 concessions in department stores, as well as 145 international stores today. But the market seems to be getting bored with the prominent use of branding on garments. Another blogger says, “You need to do something else. Clothes have to be more than just a brand. Nike and Adidas work because they are performance gear.” There’s also the Burberry problem, where your brand becomes associated with the ‘wrong’ type of people.

Enough marketing for the moment. What about finance?

SuperGroup was one of the most successful flotations of 2010 when it debuted on the stock market at 500p. The shares rocketed and hit 1899p in February last year, but have since fallen sharply, to 352p. The fall was partly due to a ‘profits warning’, which is issued to prepare the market for bad news. Astonishingly, the firm seems to have got its sums wrong and admitted to an “arithmetic error” over its forecasts. This serves as a reminder of the need for accurate financial reporting.

Operational problems have been a headache too. The botched introduction of a new IT system at the company’s warehouses had already caused problems last year. But SuperGroup has just opened a new, three-storey flagship store on London’s Regent Street that apparently looks great, with far less emphasis on branding in the new ranges and a bigger collection of accessories, but it is up against tough competition. The company has recently appointed a new finance manager, and a new operations manager. It seems as though they are much needed!

Most analysts think Superdry can be revived, though it sounds like they need to look closely at value analysis, balancing the price of items against quality/functionality and aesthetic appeal. There are still some marketing basics to get right, like pricing through different channels of distribution. Many shoppers are buying its polos, dresses and T-shirts on the eBay clearance site or from cut-price outlet stores, which has eaten into profit margins. A pair of men’s cargo shorts can be had for £29.99 on eBay, compared with £44.99 on the Superdry website or in store.