Chief Executive Officer's Review

"I am pleased to say that we have had a successful year, delivering strong financial results in a challenging retail environment and have made significant progress across a number of key areas. Our international franchise operation goes from strength to strength, and following our acquisition of SuperGroup Europe BVBA in February we are accelerating our European roll-out."
"Our UK store roll-out is firmly on track with the addition of a number of prime locations, including one of London’s most iconic and prestigious stores in Regent Street."
"We remain confident in our strategy and I am excited about the ongoing potential for the Superdry brand, at home, internationally and on-line."

Superdry Store

Superdry clothing

Group strategy

The Group has established a strategic plan which will grow revenues and profits as well as build the necessary supporting infrastructure. Growth will be driven in the following key areas:

UK Retail roll-out

Our objective is to expand the UK Retail standalone store estate by up to 150, in locations that show the greatest profit potential, match the brand demographic and target specific customer bases.

Each year we plan to open approximately 20 new standalone sites which include relocations.

While the concession estate has limited opportunity to grow there will be a number of additions to complement the standalone estate.

Accelerate internet roll-out

During the year the Group operated from two main websites which were supplemented by local language sites in France, Germany and Belgium and we now sell to over 85 countries worldwide.

The internet route to market has demonstrated exceptional growth and now represents c.8% of Group revenue (2010: c.4%). We have set ourselves a target of all e-Commerce sales to constitute 20% of total Group revenue.

International franchises

While the UK retail opportunity has potential, developing a network of franchise stores across the world is the initiative with the greatest potential to drive revenue and profit growth.

We will continue to develop a worldwide network of franchise and licensed stores and currently have 80 stores and 25 concessions in 22 countries. Three countries served by SuperGroup Europe BVBA (France, Belgium and Holland) have 39 of our international stores.

We plan to open a minimum of 50 franchise stores in 2012.

European own Retail roll-out

The acquisition of SuperGroup Europe BVBA in February 2011 provides us with an opportunity to accelerate delivery of our strategic plan. It enhances profitability, facilitates acceleration of the franchise store roll-out and gives the Group a management team that has a deep understanding of the European retail environment.

We aim to establish an estate of owned stores in key cities with the first openings likely to start in 2013.

Retail locations in the UK and Republic of Ireland

Concessions - locations map

Standalone stores - locations map

Store format 2007 2008 2009 2010 2011
Standalone stores 12 18 25 42 60
Concessions 1 30 51 56 75
Standalone – sales sq. ft. 58,254 88,939 126,704 211,680 306,571
Average sq. ft. 4,845 4,941 5,068 5,040 5,110

Wholesale worldwide partners

40 countries sold to in 2011 (2010: 36)

Wholesale worldwide partners

International sales represent 60% of Wholesale revenue (2010: 49%)

Youth Branded FashionGroup results overview

The Group has had a very successful first full year since flotation on the London Stock Exchange in March 2010, with a substantial increase in revenues and profit before tax. The Group continues to be cash generative.

Total Group revenue of £237.9m was up 71% (2010: £139.4m), with all routes to market growing substantially, demonstrating the successful results of executing our strategy during the year. Underlying operating profit1 was £50.1m, up 88% (2010: £26.7m). Profit before tax was £47.3m up 110%  (2010: £22.5m).

Overall profitability improved during the year. Underlying operating margins1 improved to 21.1%, up 2.0 percentage points (2010: 19.1%). Operating margin was 19.9%, up 3.7% pts (2010: 16.2%).


The Retail division comprises Cult and Superdry branded retail outlets in the UK and Republic of Ireland, as well as concessions and an internet offering. The division delivered revenue of £147.4m, up 71% (2010: £86.4m), representing 62% of total Group revenue (2010: 62%).

Underlying operating profit1 in the year was £37.8m, up 110% (2010: £18.0m) and underlying operating margin1 was 25.6%, up 4.8 percentage points (2010: 20.8%). Profit before tax, after charging Group overheads and before royalties was £29.3m, up 147% (2010: £11.9m), and related margin was 19.8%, up 6.1 percentage points (2010: 13.7%).

Retail 2011 2010 +/- %
£m 147.4 86.4 +71%
Underlying operating profit1
£m 37.8 18.0 +110%

Financial derivatives £m (0.5) (0.1) n/a

Including freight & duty into inventory £m 1.4 n/a

Fair value of deferred consideration £m (0.4) n/a

Exceptional items £m (3.8) n/a
Operating profit1
£m 38.3 14.1 +172%

Group overheads £m (9.1) (2.1) +323%

Finance income/(costs) £m 0.1 (0.1) n/a
Profit before tax before royalties
£m 29.3 11.9 +147%
Underlying operating margin1
% 25.6% 20.8% +4.8% pts

Superdry Morgan 3

Premium Quality Clothing

The improvement in underlying profitability1 of 4.8 percentage points was driven by changes in the product mix, particularly during the Christmas trading period when revenue is weighted towards the more profitable autumn/winter range: +2.3 percentage points; leverage of our cost base: +3.1 percentage points; partially offset by increased proportion of outlet stores opened in the second half of last year: -0.6 percentage points.

In total, we opened 21 stores during the year (of which three were relocations), adding 94,891 sq. ft. of selling space, marginally exceeding our stated target of 20 new stores per year. Cult and Superdry stores opened in three of the leading shopping centres in the UK (Lakeside in Essex, White City in West London and The Trafford Centre in Manchester).

The total number of stores increased by 18 to 60 and we now trade from 306,571 sq. ft. of selling space.

We recently announced that we have exchanged contracts, subject to landlord’s consent, for an iconic store in Regent Street (Austin Reed site), which will become our flagship Superdry store in London. The store, which comprises 58,924 gross sq. ft. (38,130 sq. ft. being retail trading space on four floors), will be an international showcase for Superdry and our London showroom.

This part of Regent Street is set to improve as a fashion location with the opening of Hollister and Burberry flagships and the addition of a new Abercrombie & Fitch store.

Our store design has developed during the year, with White City in West London, representing a step forward. This design offers an improved experience of the brand for our customers and during the coming months we will incorporate a number of these elements within our existing portfolio.

The Group continues to add retail space at a time when landlords are looking for new formats. This enables us to attract landlords’ incentives to support our store rollout. During the year, we received £9.7m in cash from landlords as a contribution to refit costs (2010: £11.2m). As communicated at the time of the flotation last year, we retained £16.4m of proceeds to fund expansion into shopping centres where landlords’ incentives were not available. Two such centres opened during the year — Lakeside and The Trafford Centre.

Our concessions in the UK increased by 19 during the year  to 75, including a prestigious location in Harrods and the conversion of two Selfridges stores that were previously supplied by the Wholesale division.

The Internet offering progressed well during the year, boosted by the launch of websites in France, Germany and Belgium and continues to offer further opportunities for future growth. Sales trebled in the year and this route to market now represents c.8% of total Group revenues (2010: c.4%).

The e-Commerce team now sells and delivers to approximately 85 countries worldwide, accessing the increasing levels of brand awareness outside the UK and allowing us to create a market opportunity ahead of physical store openings.

The e-Commerce platform has been redesigned. Market traffic has increased and the account base has grown to over 300,000 customers. Service levels have improved through shortened delivery lead times to customers, and this has been achieved by consolidating the fulfilment operation into the UK distribution centre.

Revenue and profit growth Retail £m

Revenue and profit growth Retail £m

% 2007 2008 2009 2010 2011
Underlying operating margin1 excluding Group overheads and royalties 6.9% 5.8% 9.7% 20.8% 25.6%


The Wholesale division sells to a growing number of distributors, franchisees, licensees and independent retailers (some via agents), throughout the UK and the rest of the world, as well as through a number of owned stores managed by SuperGroup Europe BVBA.

The division delivered revenue of £90.5m, up 71% (2010: £53.0m), representing 38% of total Group revenue (2010: 38%). Underlying operating profit1 in the year was £21.4m, up 98% (2010: £10.8m). Underlying operating margin1 was 23.7%, up 3.3 percentage points (2010: 20.4%). Profit before tax, after charging Group overheads and before royalties, was £18.0m, up 70% (2010: £10.6m) and related margin was 20.0% (2010: 20.0%).

Iconic Superdry store

Wholesale 2011 2010 +/- %
£m 90.5 53.0 +71%
Underlying operating profit1
£m 21.4 10.8 +98%

Financial derivatives £m (1.0) (0.1) n/a

Impact of IFRS 3 (revised) on inventory acquired at date of acquisition £m (1.9) n/a

Including freight & duty into inventory £m 0.2 n/a

Exceptional items £m (0.7) n/a
Operating profit1
£m 18.0 10.7 +69%

Group overheads £m n/a

Finance costs £m (0.1) n/a
Profit before tax before royalties
£m 18.0 10.6 +70%
Underlying operating margin1
% 23.7 20.4 +3.3% pts

The improvement in underlying profitability1 of 3.3 percentage points was driven by improved supply chain efficiency: +2.0 percentage points; increased royalties and enforcement of intellectual property rights: +1.8 percentage points; partially offset by the acquisition of SuperGroup Europe BVBA contributing for a three month period which included the impact of seasonally slower trading: -0.5 percentage points.

SuperGroup Europe BVBA has performed well and expectations of profit delivery are in line with our projections. Eight new owned and franchised stores have opened since acquisition and increasing focus is being placed on accelerating the European franchise store rollout. Sales in the first three months since acquisition to the end of the year were £11.7m, generating an underlying profit before tax1 of £1.9m.

The significant success delivered by Wholesale is a result of new franchise and licence agreements that have led to the creation of 80 stores and 25 concessions in 22 countries. We opened 44 franchised and licensed stores internationally during the year, of which 24 are in Benelux and France. Increasingly, the focus will be to accelerate the opening of franchise stores across Europe. Together with the rest of the world, we plan to open at least 50 new franchise and licensed stores in 2012.

Overseas, Superdry is now sold in 40 countries (2010: 36) and this represents 60% of total Wholesale revenues (2010: 49%).

Revenue and profit growth Wholesale £m

Revenue and profit growth Wholesale £m

% 2007 2008 2009 2010 2011
Underlying operating margin1 excluding Group overheads and royalties 9.3% 24.4% 11.6% 20.4% 23.7%
Overseas mix 34% 20% 33% 49% 60%

Developing the supply chain

The Group is built around the Superdry branded range of clothing and accessories. Our products are designed in-house and manufactured in a number of overseas factories known for their expertise in particular product categories.

Our relationships with suppliers have been forged over several years and are critical to offering our customers the very best in affordable, quality clothing and accessories.

We recognise that, as Superdry grows, we must broaden our supplier base in order to manage risk and meet growth expectations. During the year, we increased the number of suppliers to 47 (2010: 33) and we expect this evolution to continue.

Strengthening our support infrastructure

The Group continues to be strengthened to deliver our strategy. We employ experienced and well trained managers, supported by committed teams who are focused on delivering growth. Our head office team is expanding, and will continue to do so, as we acquire the necessary skills to support and drive the next stage of business development. During the year and subsequently, a number of significant appointments have been made, notably Heads of Merchandising, Property, IT and e-Commerce. A Head of Sourcing is due to start in the second quarter and we have appointed a Head of Logistics. The design team has been strengthened as well and we will continue to build this core capability.

We are upgrading our infrastructure to enable us to deliver our target growth and store roll-out programme. The UK distribution centre was expanded to add a further 77,000 sq. ft., now totalling almost 200,000 sq. ft., thereby allowing our internet business to offer next day despatch in the UK.

A new warehouse management system will be implemented in the summer of 2011 to enable greater efficiency, particularly regarding UK store replenishment and internet fulfilment. Other enhancements to our systems capability are planned for 2012 and beyond. Further to this, process and control improvements will be made with a focus on customer service.

Mens Fashion

Ladies fashion

Current trading and outlook

As at the end of week 10 (ending 10 July 2011) total Retail sales were up +48%, Wholesale sales were up +75% and the Group was up +56% compared with the same period last year.

In the UK, our store roll-out remains on track to deliver 20 standalone stores in the current financial year and three stores have opened so far. The pipeline is strong with 10 new stores legally committed and we are working on a further 24, nine of which have Heads of Terms agreed. We remain confident of opening between six to 10 stores in the first half.

Assuming landlord’s consent, our flagship store on Regent Street is expected to open towards the end of the financial year.

Our online offer is developing well with further overseas websites planned. A country-specific site in the Netherlands opened after the year-end and a programme of continual improvement and development of the core platform
is underway.

We intend opening a minimum of 50 franchise and licensed stores globally in 2012. Following the acquisition of SuperGroup Europe BVBA, our European prospects have improved and we will accelerate the franchise opening programme across this territory. In addition, negotiations continue with a number of high profile partners in key territories outside Europe, with a focus on the Middle East and Asia.

The Group strategy is on track and we see the potential for a year of further growth for the Superdry brand and our business.

We have travelled a long way in the past year and achieved a great deal, none of which would have been possible without the support of each and every person at SuperGroup.

From shopfloor to boardroom, their professionalism, passion and commitment are extraordinary. They are our business and our future, and I thank them all.

Julian Dunkerton - signature

Julian Dunkerton
Chief Executive Officer
4 August 2011