Peel Hunt lifts Superdry to ‘add’, hails new clothing ranges

Peel Hunt upped its rating on Superdry to ‘add’ from ‘hold’ on Wednesday as it hailed the retailer's new clothing ranges.

The broker said it had stumbled upon one of the company’s reset stores in Merry Hill last month and found new ranges and improved merchandising, a significant step-up" on what has come before.

"Suitably impressed, we followed up with a visit to Superdry’s offices yesterday to take a look at next year’s ranges. The new ranges are light years ahead of the past, as the brand is transitioning to a more defined and clearer market positioning, which is more about product than labels."

Peel Hunt noted the shares have been left in the "priced to fail box", now trading on 1.6x FY18 price-to-earnings, "4.7x the disastrous FY19", and Superdry is forecast to deliver a Covid-19-driven loss this year.

"However, our FY23E retail revenues sit circa 20% below FY19, and our FY23E wholesale revenues circa 30% below; there’s nothing in here for recovery and we are a touch ahead of consensus," it said.

The broker said the balance sheet is strong, with net cash, and a chunk of Covid-19 stock and debtor provisioning.

"Our April 2022E free cash flow yield is circa 28%, on fairly weak forecast assumptions. We have more work to do, but on the strength of what we can see in-store, online and to come, coupled with deep value on lacklustre forecasts, we upgrade to add."