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Lessons from the Superdry saga

Daniel Lane

Daniel Lane - Fidelity Personal Investing

With my first ever pay cheque I walked into my favourite eclectic clothes shop and bought a Superdry leather jacket. It cost me four shifts in the care home and it was worth every penny, especially as it went so well with the long hair and Rolling Stones T shirt. What a time to be alive.

Lessons from the Superdry saga

However, only a few months later I realised I didn’t have to venture off the high street because two standalone Superdry stores had sprung up in the centre of town. Unfortunately, everything I saw in them was everything I saw in every other teen-fashion store. 16 year old me wasn’t a shareholder but I voted with my feet.

The change my friends and I saw in the brand back then was only the start of a drawn-out and tumultuous few years for the company.

Co-founder Julian Dunkerton was chief executive of the group until 2014, becoming creative director when former Co-op boss Euan Sutherland took over the top job. Dunkerton left the company around a year ago but still owns 18% of the firm he started from a market stall in Cheltenham.

Since Dunkerton's departure Superdry's shares have fallen by around 65% so Tuesday’s vote bringing the outspoken founder back onto the board will encourage some. 51.2% of shareholders opted to give Dunkerton a seat although the enthusiasm was not universally shared, as eight directors resigned soon after.

Dunkerton hopes to revive the brand’s fortunes and reverse plans to branch out further into childrenswear, saying a 16-year-old "quite categorically" will not want to wear the same brand as their five-year-old brother.

So what can we learn from the messiness?

Most investors like to see management with skin in the game but having a big personality at the helm can be a double-edged sword. If the business’s success relies on such a person then it becomes vulnerable to their foibles as well as their creativity. Balance, experience and focus are key. As Warren Buffett puts it: “I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”

Perhaps the biggest lesson investors can take away from Superdry’s journey is making sure the corporate growth strategy doesn’t sacrifice the very thing that got the company this far. Seeking short-term profits or expansion at the expense of the long-term sustainability of the core offering is a bold move and one likely to alienate original consumers and investors alike.

Retail has been vicious over the past 18 months but the high street stores still standing have clear identities and often unique and differentiated product offerings like Hotel Chocolat, rather than generic offerings like some of the chain restaurants.

Superdry will need to redefine what its purpose is because consumers are telling the high street that being all things to all people simply isn’t working. However, investors will be looking for signs of stability and composure in the boardroom more than anything.

One fund laser-focused on identifying unique businesses at the top of their game is Nick Train’s LF Lindsell Train UK Equity Fund, part of the Select 50 and one of Tom’s Stevenson’s top picks for your ISA this tax year.

Train holds best in class companies with stables of strong brands like Burberry, Diageo and Unilever with a view to holding them for the long-term and making sure company management sticks to a measured approach to growth.

Don’t forget this tax year ends at midnight on 5 April so this is the last week you have to make the most of your ISA. I’ll also be speaking at the Master Investor Show in London this Saturday 6 April. Join me if you can.

Five year performance

(%)
As at 2 April
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Superdry -44.8 51.2 7.6 7.0 -65.9

Past performance is not a reliable indicator of future returns

Source: F.E, as at 2.4.19, in GBP with income reinvested 

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.