The Superdry (LSE:SDRY) share price has had a rough couple of years. After failing to maintain its market share, the fashion company saw its stock price plummet. And that was before the pandemic came into the picture.
Despite this poor performance, the stock has actually been moving up. In fact, over the last 12 months, the Superdry share price has risen by almost 100%. And earlier this month, it continued its upward momentum following its latest earnings release. Let’s take a closer look at the numbers and see whether the stock can continue to climb higher.
The Superdry share price surges on earnings
Despite what the leap in the Superdry share price would indicate, these latest earnings were a bit of a mixed bag. Pandemic-related disruptions resulted in approximately 39% of store days being lost as a large chunk of its shops remained closed. Online sales did manage to mitigate this impact. However, overall revenue generated between April 2020 and April 2021 ultimately fell by 21%.
On the more encouraging side of things, operating losses have improved drastically. In 2020, the firm reported a loss of £159.4m. This year, the number fell to £29.5m. And as a result, analyst forecasts estimate that the firm will return to profitability in 2022 as the effects of the pandemic start to wear off.
With that in mind, I can see why some investors are becoming more optimistic about the future outlook. And if management can start delivering higher sales volumes while improving margins, I wouldn’t be surprised to see the Superdry share price continue to climb higher. Having said that, I personally remain a bit sceptical.
The long road ahead
As I previously stated, the initial decline of the Superdry share price originated from an inability to retain market share and branding power against its competitors. Management is still trying to rectify this problem. Some of the steps taken include launching five new collections, shifting 33% of its product portfolio to use sustainably sourced materials, and deploying robots to improve warehouse efficiency for online sales.
And yet despite these efforts, total active customers over the last 12 months only grew by a measly 3%. Meanwhile, the revenue generated between April and August only grew 1.9%. It’s true that in-store sales are back on the rise. But at the same time, online sales are falling, suggesting customers are simply switching back to old shopping habits rather than the firm attracting new ones – a risk I highlighted back in May. To me, this is not a promising start for its 2022 fiscal year.
The bottom line
Rebuilding a brand is not an easy task and will likely be a multi-year process. But if management can pull it off, I reckon the Superdry share price could eventually return to its historical levels. Personally, I remain un-tempted to jump in by these latest results as I think there are far better opportunities elsewhere.