AN ICONIC high street fashion brand has issued a major update on its future, including the risk of falling into administration.
Superdry plans to delist from the London Stock Exchange as the troubled fashion chain launched a restructuring plan and an equity raise.
AlamyIt comes just months after Superdry’s chief executive Julian Dunkerton discussed a bid to take the embattled British retailer private[/caption]
It said it would be forced to enter into administration if it did not go ahead with the plans.
It announced a string of cost-cutting measures, including reducing the rents on 39 of its UK sites and extending the maturity date of large loans.
However, it’s important to confirm that stores could still close in the future.
There’s no guarantee that landlords will agree to proposed rent cuts.
If they choose not to, they are well within their own right to terminate Superdry’s leases – a move which would result in store closures.
It also wants to return to sales growth through measures such as improving its product ranges and reallocating marketing spend, and it expects household conditions to improve.
The fashion business, which operates 216 shops (94 in the UK) and franchised stores, has been examining various ways to cut costs after a year of weakening sales and deepening losses.
The company is looking to raise up to £10 million through an equity raise, which means selling new shares.
This will be backed and insured by Superdry’s co-founder and chief executive Julian Dunkerton, who assured his “passion for this great British brand remains as strong today as it was when I founded the business”.
Superdry said it wants to delist from the London markets as a result of the plans, which need to be implemented “away from the heightened exposure of public markets”.
Delisting will also help it make cost savings, it said.
The business needs shareholders to approve the move at its general meeting before it can apply to cancel its listing. Shares tumbled by more than 30% in early trading on Tuesday.
Mr Dunkerton added: “Today’s announcement marks a critical moment in Superdry’s history.
“At its heart, these proposals are putting the business on the right footing to secure its long-term future following a period of unprecedented challenges.
“I am aware of the implications for all our stakeholders and I have sought to protect their interests as much as possible in the proposals we are announcing today.”
Superdry’s chairman Peter Sjolander said: “The business has faced extraordinary external challenges and, while good progress has been made on our cost-saving initiatives, more needs to be done to get the business on a stable financial footing for the future.
“While we recognise the compromises we are asking from some of our stakeholder groups, we would urge them to support the proposals which we believe are the best way of ensuring Superdry’s recovery over the long term.”
A restructuring plan enables a company to restructure its balance sheet and, hence, release working capital into the business.
It falls short of the company calling a company voluntary arrangement (CVA) which is a form of insolvency and have been more commonly implemented as an alternative.
A CVA is a way for a business to restructure but continue to trade.
Like a restructuring plan a CVA can give a company some breathing space or allow it to reorganise or restructure its funding and/or its operations with as little disruption as possible.
However, unlike a CVA, restructuring plans, once approved, are legally binding on both secured and unsecured creditors, including landlords.
When businesses struggle financially but still want to carry on with business operations and believe they may be salvaged, they could adopt a restructuring plan.
In January, Superdry said it is looking at various “cost-saving options”.
The troubled brand was said to be working with advisers at PwC on a plan which could lead to a CVA (company voluntary arrangement) or another form of restructuring.
Such a move could result in store closures and potentially force rent reductions with landlords.
The company’s latest survival bid, which will require the approval of its creditors, comes after discussions about taking the company private fell through.
In February, Superdry’s chief executive Julian Dunkerton discussed a bid to take the embattled British retailer private with the help of Rcapital and Gordon Brothers.
However, the plan was soon aborted, but discussion remains over a potential equity raise.
The firm recently revealed a sharp slump in sales over the half-year to October and warned shareholders its fortunes could still take some time to turn around.
The clothing firm said that its revenue had fallen by nearly a quarter (23.5%) to £219.8million in the six months to the end of October, with adjusted loss nearly doubling to £25.3million.
The retail business, which employs around 3,350 globally, said it also cut around £20million in costs over the half-year and is on track for over £40million in savings for the current year.
This saw the business close 12 stores over the first half of the financial year, taking its estate down 216 owned stores – 94 of which are located in the UK.
In August 2023, Superdry secured up to £25million in funding from Hilco Capital.
The business said the extra funding would help accelerate its £35million cost reduction programme, announced in April.
Why are retailers closing stores?
RETAILERS have been feeling the squeeze since the pandemic, while shoppers are cutting back on spending due to the soaring cost of living crisis.
High energy costs and a move to shopping online after the pandemic are also taking a toll, and many high street shops have struggled to keep going.
The high street has seen a whole raft of closures over the past year, and more are coming.
The number of jobs lost in British retail dropped last year, but 120,000 people still lost their employment, figures have suggested.
Figures from the Centre for Retail Research revealed that 10,494 shops closed for the last time during 2023, and 119,405 jobs were lost in the sector.
It was fewer shops than had been lost for several years, and a reduction from 151,641 jobs lost in 2022.
The centre’s director, Professor Joshua Bamfield, said the improvement is “less bad” than good.
Although there were some big-name losses from the high street, including Wilko, many large companies had already gone bust before 2022, the centre said, such as Topshop owner Arcadia, Jessops and Debenhams.
“The cost-of-living crisis, inflation and increases in interest rates have led many consumers to tighten their belts, reducing retail spend,” Prof Bamfield said.
“Retailers themselves have suffered increasing energy and occupancy costs, staff shortages and falling demand that have made rebuilding profits after extensive store closures during the pandemic exceptionally difficult.”
Alongside Wilko, which employed around 12,000 people when it collapsed, 2023’s biggest failures included Paperchase, Cath Kidston, Planet Organic and Tile Giant.
The Centre for Retail Research said most stores were closed because companies were trying to reorganise and cut costs rather than the business failing.
However, experts have warned there will likely be more failures this year as consumers keep their belts tight and borrowing costs soar for businesses.
The Body Shop and Ted Baker are the biggest names to have already collapsed into administration this year.
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