Superdry (LSE:SDRY) was a staple of my wardrobe once upon a time. The Superdry share price also used to be a lot higher than current levels. So what’s been happening recently and should I consider adding these cheap shares to my portfolio?
Superdry share price journey
Superdry has over 750 stores across 65 countries. With such a strong physical presence, Superdry relies heavily on footfall. The demise of the high street shopping experience has been well documented recently. An uprising of online, fast-fashion, e-commerce-savvy brands have exacerbated this. The pandemic also led many shoppers to online shopping as stores closed due to restrictions. Brands with primarily physical locations had to adopt stronger online presences to keep up with the competition.
As I write, the Superdry share price is trading for 270p per share. A year ago shares were trading for 180p per share, which equates to a 50% return. It is worth noting that in the past, shares reached over 2,000p per share! Superdry has been on a downward trajectory for some time but a rebuild is underway. Could this rebuild see Superdry become a viable investment once more?
Mixed results and rebuilding
At the end of last month, Superdry announced full-year results for the year ending 20 April. I think the results were a mixed bag with some encouraging signs. Due to the pandemic, close to 40% of store days were lost due to restrictions. These closures will have affected performance overall. Online sales did mitigate these closures, however. Revenue for the full year fell by 21% overall. The Superdry share price is up marginally since results were posted.
Superdry reported an operating loss of £29.5m. Any loss is discouraging but in this case, it is good news. The operating loss for 2020 was substantially higher, at £159.4m, so things are moving in the right direction. In fact, analysts predict Superdry could return to profitability in 2022 as the pandemic effect wears off.
Superdry has lost significant market share over the years. The Superdry share price has declined in line with this. In addition to this, competitors have got ahead of the once high-flying brand. Superdry’s management has taken steps to rebuild the brand and regain market share.
Firstly, Superdry has launched five new collections. Next, it has decided to use sustainably sourced materials for 33% of its product portfolio. This will go down a treat with ethical investors. ESG investing is gaining traction right now. Finally, it has also taken steps to improve efficiency in its warehouses by deploying robots for its online operations.
Risks and my verdict
Overall, Superdry is working hard to try and rectify its problems. The main risk I see with investing in Superdry shares is competition. I believe there are much more powerful brands out there with better brand recognition, more market share, and much more savvy operations. As Superdry rebuilds to keep up, these others will continue to work hard to continue their rise as well.
Superdry will have to work hard to return to former glory in my opinion. I don’t think the Superdry share price will return to four figures anytime soon. I wouldn’t invest in shares right now, personally. I believe there are better opportunities elsewhere.