Strategic Report


SuperGroup Plc ("SuperGroup" or the "Company") is the owner of Superdry, a casual lifestyle brand operating predominantly in the branded fashion sector.

It targets the younger end of the fashion market, specifically designing for men and women aged between 15 and 25 years old with affordable, premium-quality clothing, accessories, footwear and cosmetics. Increasingly, the brand appeals to a much broader age group as it develops the breadth and nature of its product ranges. Already well established in the UK, its home market, the Company and its subsidiaries (the "Group") also operate a significant and continually expanding international business which is developed through websites, wholesale partners, a network of franchise stores and, increasingly, its own stores.

The business has expanded quickly over the 11 years of its life, becoming a truly international brand as it has done so, and there has been no slowdown over the past 12 months as the Group has added over 100 new stores to its portfolio around the world taking its total number of stores to 516, with a physical presence in 46 countries.

At the end of the 2014 financial year ("2014" or "FY14") the Group's direct customer channels consisted of:

  • 139 of its own stores;
  • 74 concessions;
  • 185 franchised stores;
  • 23 licensed stores;
  • 95 shop-in-shop stores; and
  • 18 international websites.

In addition to those shops and websites, the Group has a successful and growing wholesale business. In the UK it sells directly to third party retailers but internationally it predominantly uses a distribution network, taking advantage of local knowledge and expertise in each country.

Superdry focuses on high-quality, contemporary products that, in varying degrees, fuse vintage Americana and Japanese-inspired graphics with a British style. They are characterised by:

  • quality fabrics with authentic vintage washes;
  • unique vintage detailing;
  • world leading hand-drawn graphics; and
  • tailored fits with diverse styling.

Market Review

Whilst the Group competes with all clothing retailers on an indirect basis, Superdry occupies a niche position within the branded fashion market that has relatively few direct competitors. There is a degree of local competition in virtually every market in which the brand operates, particularly in the UK market, but, with the range of developments and geographical expansion the Group has undertaken over the last few years, there are a limited number of brands with the scale and presence to compete effectively with the Group on a truly global basis.

The Group operates both on the high street and through e-commerce channels, competing with traditional retailers and brands, pure e-commerce operators, and multi-channel businesses. The retail market is changing rapidly as online becomes an increasingly important part of consumers' shopping habits and it is fundamentally important that the Group reacts to those changes and is seen as a leader in the multi-channel environment to retain its competitiveness.

Superdry entered the international market at an early stage of its development and now has a presence in 46 countries around the world; 37% of total sales now come from the Group's international business. This has provided the Group with invaluable experience of operating overseas that will allow it to continue to develop its less established markets. It also gives the necessary experience and foundations to allow the Company to enter new markets around the world.

Whilst the Group's businesses in territories outside Europe are growing quickly, the majority of revenues are generated within Europe and, particularly, the UK. The European clothing market is forecast to achieve expenditure growth of 1.9% during the 2014 calendar year, according to Verdict Research, and this signals the beginning of a sustained period of growth as economic conditions improve across the Eurozone. SuperGroup is well positioned to take advantage of this structural growth as it targets new markets and bolsters its presence with its owned retail estate in more well-developed markets.

The short to medium-term focus of the Group is to grow the retail proposition in Western Europe, with a particular emphasis on Germany. Going forward it is anticipated that around 80% of the Group's new space will be in overseas markets. Whilst the economic difficulties between 2007 and 2012 led to a decline in the overall European clothing market of around 4% (source: Verdict), the German market, which represents circa 20% of the total, has experienced positive growth through this period and is second only to the UK in its economic recovery. The German market is already a strong one for the Group, with Superdry presently sold through more than 200 independent stores and a local language website. The German market is forecast to grow at 16.3% over the next five years and is already the largest clothing market in Europe, estimated at a value of €58.4bn.

Despite its maturity, the UK is forecast to achieve clothing expenditure growth of 22.8% between 2014 and 2019, with menswear growth expected to be particularly strong. The UK remains, however, a highly competitive marketplace with high levels of discounting being used to entice customers and drive sales.

Business Model

SuperGroup designs, produces and sells products exclusively under the Superdry brand. Product conception and design and the overall management of the brand is centrally located at the Group's head office in Cheltenham, along with the majority of support functions. Whilst the design and ordering processes are managed within the Group, products are manufactured through the Group's third party suppliers, predominantly located in China, India and Turkey.

The Group has two primary channels to market: Retail and Wholesale. The Retail business comprises the entire owned store portfolio in the UK and mainland Europe, together with the Group's portfolio of websites. The Wholesale division is made up of four key components:

  • International franchise partners and individual franchise stores;
  • International distribution partners, supplying the independent retail markets in their territories;
  • UK key wholesale accounts; and
  • UK independent wholesale accounts.

Business model 2014

During FY14, the Retail division accounted for 66% of revenue and Wholesale 34%.

SuperGroup has a significant and growing presence around the world, operating through 516 Superdry branded locations in 46 countries. There are 139 owned stores across the UK and Europe, 208 franchised and licensed stores, all but one outside the UK, and 168 concessions. The owned store estate operates from three types of store: smaller boutique stores, typically found in Europe; medium-sized stores of around 5,000 square feet principally in the UK, but increasingly in Europe; and the much larger flagship store in Regent Street, London. Complementing this physical presence, the Group has 18 international Superdry websites.

Retail divisionWholesale division
InternetOwn storesConcessionFranchisedLicensedWholesale
Total stores
Austria 2 3 5
Belgium220 5732
Czech Republic11
Denmark1 7 7
Finland1 1 23
France14 47253
Germany110 2 12
Greece  246
Hungary  101
Italy1 8 8
Latvia  1 1
Luxembourg  2 2
Netherlands17 5113
Norway1 4 4
Portugal 2 2
Slovenia  11
Spain1828 36
Sweden1  0
Switzerland2 516
Turkey  2 2
UK and ROI196641 161
Total Europe1413974125022360
South Africa  3 3
China1   0
Georgia  1 1
Hong Kong 527
India 8 311
Indonesia 527
Macau 1 1
Malaysia 235
Philippines 4 4
Singapore  22
South Korea 41418
Taiwan 21618
Thailand 415
Australia  9 1019
Egypt 1 1
Kuwait 3 3
Lebanon 2 2
Qatar 1 1
Saudi Arabia 2 2
UAE 718
Canada2 33
USA1 14115
Columbia 21416
Venezuela  3 3
Total ROW400602372155
Grand Total 18139741852394515

Retail division accounted for



Wholesale division accounted for



The Group's most significant presence is in the UK with 96 of its own stores augmented by 64 concessions and one franchise store. Over its 11 year history in the UK, as brand awareness and range breadth has grown, the Group has migrated away from franchise and wholesale operations and moved its focus towards larger and more profitable owned stores. Key UK wholesale accounts and smaller independent retailers continue to play an important role, presenting Superdry product to different customer types and in towns where it would not be viable to operate a full Superdry store.

In order to enter a new territory, the Group initially establishes a brand presence through wholesale operations and/or by engaging franchise partners. In certain circumstances this is augmented by territory specific e-commerce sites but even where it is not, the introduction of the brand to a new market increases awareness and drives traffic to the .com site. This approach allows the Group to grow its business and brand awareness with minimal risk and to maintain control over the 'look and feel' of the brand and stores. Franchisees agree to buy approved fixtures and fittings directly from SuperGroup and the Superdry visual merchandising team plays a pivotal role in setting up and overseeing the establishment of each store. This model allows the Group to grow in many countries at the same time without stretching internal resources and with relatively low risk, as limited capital investment is required.

As the brand develops traction with the customer in a particular territory and the operating risks diminish, the Group, where appropriate, will seek to augment wholesale activity with a retail model of owned stores. As the markets become more established and awareness is at an appropriate level, the Group may seek to open its own stores in those territories, using its own capital to deliver larger stores that can showcase the entire SuperGroup product range. To achieve this, the Group has used strategic acquisitions as part of its growth strategy. It acquired SuperGroup Europe BVBA in February 2011 which provided a platform, through the existing portfolio of stores and an experienced local management team, to develop a retail and wholesale proposition across the Benelux countries and France. In the last 12 months, SuperGroup has bought back its territory rights in Spain and Germany and has recently announced a similar deal to acquire its Scandinavian partner giving it rights to open stores in Denmark, Norway and Finland. Deals of this nature allow the Group to accelerate expansion by investing its own capital in space whilst retaining the local expertise of the distributor and his or her team.

The Group has, historically, granted two Wholesale and Retail licenses: one in the USA and the other in Australia. These contracts are long-term in nature and the licence holders have exclusive rights to the countries in which they operate. SuperGroup receives a royalty on the sales generated by the licensee, who must buy only approved stock from the Group's own suppliers or directly from SuperGroup.

As a branded fashion retailer, the Group is focused on managing the integrity of the brand in order to deliver sustainable and long-term growth. Whilst this strategy may at times cause short-term volatility to like-for-like sales growth, management feels that the focus on full-price trading, limiting the level of clearance activity through discreet channels delivers strong cash generation, superior margins and consequently high rates of return on capital. Consequently, the Group has an unconventional but effective approach to clearance activity, never holding 'sale' periods or overt promotions within its UK stores. Rather than marking down product in situ, as most retailers do, old or slow moving stock is generally cleared through the network of outlet stores across the UK and, increasingly, Europe. For particularly aged stock that remains unsold, the Group has historically used eBay and discount resellers to optimise margins. This approach preserves the integrity of the brand by maintaining a more premium feel across the vast majority of the network. Whilst it requires a greater investment in working capital, as stock can be held in the business for several seasons, it provides the Group with a greater return than more conventional clearance activity and maximises profit per unit. It also allows the business to respond to unusual weather conditions towards the end of a season because, unlike many retailers, stock is not liquidated in a clearance sale to meet a season launch. Outside the UK, stores are governed by the trading practices in the relevant territories in which they trade, meaning that limited sales are held in certain parts of Europe at the appropriate times.

SuperGroup regards the Superdry brand as being less sensitive to fashion and design trends than other clothing retailers and therefore can operate comfortably with the longer supply chain lead times that a wholesale business generally demands. The Group sells its products during two principal seasons: spring/summer and autumn/winter. There are two limited supplementary ranges produced for the end of each season to maintain a degree of newness in stores: high summer and winter flash. The business also has a number of products that are sold throughout the year, known as continuity lines, which provide some protection against particularly unseasonal weather patterns.

Key Growth Drivers

The roll-out of owned stores

Around 86% of the current owned retail estate space is located in the UK and the Republic of Ireland. Whilst there are still some opportunities for new stores and, in particular, relocations of existing stores to larger sites, the majority of future space growth will come from continental Europe, which represents a market approximately five times the size of the UK. The main focus will be on Germany, a market where Superdry has a proven track record with the potential to emulate the business in the UK, but there will be opportunities in all the territories the Group has reacquired or owns the rights to, but in particular:

  • France
  • Belgium
  • The Netherlands
  • Sweden
  • Denmark

Growing the franchise estate

Many existing franchise partnerships have contracted store numbers and these alone will provide an opportunity for at least a further 200 franchised stores worldwide over the next five years. The table below illustrates the significant number of countries where there are already operations with the opportunity to grow and achieve scale. The Group will continue to seek further international partners for territories where it has little or no presence but believes the brand will be well received, for example China, Russia and South America. The Group does this by forming relationships with reputable and experienced partners that have demonstrated a strong track record of developing brands and have sufficient capital strength to invest in a credible store proposition.

Optimising and expanding the e-commerce platforms

In addition to developing brand presence, the growth of overseas e-commerce clearly has implications for international store expansion, offering an important and valuable insight into the strength of the brand, the demand for Superdry products, and the requirements for country-specific product ranges. The Group operates from 18 international websites with local payment solutions, local languages, and pricing in local currencies. An opportunity exists to better leverage this investment by improving the underlying conversion of visits to purchase activity. There are a number of enhancements that can help deliver this but an important one is developing the Group's social media presence, an area that has become integral to the lives of its target customer group in recent years. The Group does not invest large amounts in traditional marketing, but believes that social media is an important part of the journey to true multi-channel retailing and will seek to use it accordingly. There are also significant opportunities to increase the number of sites to match the physical presence of Superdry around the globe.

Driving wholesale business

In a number of the Group's less mature markets, wholesale will continue to play an important part in gaining market share. Department stores and independent multi-brand retailers still play an important role in the shopping landscape and provide a platform for new brands to gain traction and awareness. In these countries, wholesale operations will complement franchise stores, e-commerce and, in some territories, owned stores.

SuperGroup's current estate based on square feet %

Current estate

European markets broken down by market share %

European markets

Maximising/optimising the UK estate

The Group has 544,000 square feet of owned retail space across 96 stores in the UK. Over the last three years, the average size of a typical Superdry store has increased from 5,085 square feet in 2011 to 5,671 square feet in 2014. The product range has grown at a faster rate than this, the result of which is that a number of the Group's stores are now too space restricted to show the optimum range for that particular market. As such there are a small number of towns where the Group has targeted relocation and resizing opportunities.

Enhancing the Superdry brand through increasing the product range and brand extensions

The Superdry brand has been significantly enhanced over the past few years with the increase in breadth and depth of the product offering. This has been done by extending and developing the core ranges to include products that previously weren't offered, such as:

  • premium tailoring;
  • dresses;
  • accessories;
  • underwear;
  • watches;
  • sunglasses; and
  • cosmetics and fragrance, among others.

The Group has been increasing its focus on womenswear over recent seasons and will continue to do so as it provides a great opportunity to attract new customers and provide like-for-like growth. Womenswear currently occupies approximately 50% of retail floor space, on average, to ensure that it has presence and credibility as an offer. However, it presently accounts for around 33% of revenues, a fact that the Board views as a key opportunity to increase sales through organic growth over the medium-term as sales densities move towards those of menswear. As a global brand, product excellence, innovation and design is key to sustainable long-term growth. Continued diversification into new categories and ongoing investment in the design team will underpin the strength and longevity of the Superdry brand.

A stable and developing infrastructure

The Group has made significant investments over the last 18 months in its management team, logistics facilities, and information technology. This investment has been made to establish the foundations for future growth, facilitate the expansion strategy, and provide a platform that will enable the business to operate more efficiently and effectively in the future. There will always be more to do and FY15 will see the introduction of a new point of sale and finance system together with a major upgrade of the Group's wholesale system. It is fair to say, however, that the most difficult of these changes, the relocation of the Group's main warehouse and the implementation of a new merchandising system, have been largely completed.

Review of the Year

SuperGroup has made significant progress during the past year. The business has undertaken a comprehensive infrastructure improvement programme that will start to deliver tangible benefits into the new financial year, and lay the foundations for the next phase of growth. This has been achieved whilst simultaneously delivering significant growth in revenues and underlying profits. Underlying profit before tax has grown by +18.8% to £62.0m (2013: £52.2m).

The Group's core objective continues to be delivering growth in shareholder value and, in doing so, to build a global business that is capable of delivering long-term, sustainable profit and cash flow growth.


Sales increased by 19.6% on the year; a strong result in what remains a very competitive and challenging retail environment and against a backdrop of such significant developments in infrastructure. Revenue growth was relatively consistent across the two divisions, with Retail delivering sales growth of 17.7% and Wholesale 23.3% on the prior year.

The Group achieved like-for-like sales growth of +3.2% in FY14. Adjusting for the impact of eBay 'mega-sales', an activity the Group undertook historically to clear aged stock, underlying like-for-likes were +4.4%. Like-for-like sales grew strongly across the first half of the year, increasing by 8.1%. Quarter 3, which includes the important Christmas trading period and is the most significant retail quarter of the year, saw a rise in like-for-like sales of +4.5% despite the very tough comparative of +9.4% from the year before. Quarter 4 was affected by a lack of new spring stock in store, heavy competitor discounting, (including some Superdry products by wholesale partners), and a late Easter. The resultant like-for-like sales were down by -3.2%, although this was -1.3% adjusting for the change in eBay.

Product and brand

With investments made in the size and quality of the design department over the last couple of years, the Group continuously strives to improve its overall product offering, both in terms of quality and breadth. The Group continues to see the biggest opportunities in denim and womenswear, which are still underweight categories in the overall product portfolio and will be a key focus in coming seasons. In addition, there are new product ranges being introduced, for example Superdry skiwear, which will continue to push brand awareness and attract new customers. On 13 February 2014, a Premium Lounge was launched on the lower ground floor of the Regent Street flagship store. The premium range includes Superdry's premium tailoring range, its higher-end casualwear, called Superdry Luxe, the more premium leather jackets, and the artisan Copper Label branded goods. These new ranges provide an opportunity for the Group to extend its demographic, grow its average transaction value and drive press coverage of the brand as well as potentially providing a wholesale opportunity with a new set of customers.

For the first time since the inception of Superdry, the Group attended one of the two main London Fashion Week events. The autumn/winter 2014 collections for both menswear and womenswear were launched at the London Collections: Mens event on 7 January 2014. The progress that has been made over the last few years and the global acceptance of the brand have given the Group the confidence to showcase new ranges at this type of high profile event. It was well attended by the Group's international partners and the fashion press.

Store openings

Around 100,000 square feet of retail space was opened during the year taking the Group to 633,000 square feet and 139 owned stores. There was a net increase of 11 new stores across the UK and Republic of Ireland, which included stores in Southampton, two stores in Newcastle, the Cribbs Causeway shopping centre just outside Bristol, and the Dundrum shopping centre, near Dublin. In Europe, 15 stores were added to the portfolio, which included new larger-format stores in Aeroville (France), Amsterdam, and Bruges. These stores follow on from the successful pilot store in Oberhausen, Germany, that opened last year and represent a marked change from the current portfolio in Europe which consists mainly of smaller boutique-style stores.

In October 2014, SuperGroup bought out its German agent and franchise partner and, in the process, acquired its portfolio of seven stores, adding approximately 14,000 square feet to the estate. The Group holds a 70% stake in a venture in Germany, which it runs in collaboration with previous management who run the operations for wholesale, franchise and retail. More importantly, the business now has the rights to the German and Austrian markets, which will enable it to use its own capital to accelerate the roll-out of owned retail stores throughout the country.

Germany offers a significant opportunity for the Group with a retail fashion market that is valued at €58.4bn by Verdict Research, some 28% larger than the UK. The Group's confidence in the German market is underpinned by the positive performance of the Oberhausen store, which is generating strong positive like-for-like sales growth, and the success that has been experienced in the Wholesale business to date.

In July 2014 SuperGroup bought out its Spanish distributor, bringing the management team in house as part of the deal to preserve expertise and experience. As with the German transaction, this deal allows the Group to invest its own capital in the territory to take advantage of opportunities that could not be delivered under the previous structures, as well as improving the margins achieved through the wholesale operations. The Group has subsequently opened ten concessions in the regionally important El Corte Ingles department store chain across Spain and Portugal. Despite the uncertainties around the Spanish economy, the territory has provided strong growth for SuperGroup's Wholesale division over the last few years.

The German and Spanish businesses have both been successfully integrated into the Group during the second half.

Following the activities of FY14, the Group now has 139 owned stores across the European Union and trades from 633,000 square feet.

FY13FY14 movementFY14
Square feetStoresSquare feetStoresSquare feetStores

Financial year 2015 (FY15) will see the Group open between 80,000 and 100,000 square feet of retail space with the emphasis shifting towards European stores and, in particular, the German market. The Group has a strong pipeline of space for the next 18 months with the majority of the coming financial year's either exchanged or with agreed heads of terms. Of particular interest is the first European flagship which will open in the German city of Munich in October.


The Group has delivered improvements in both its website traffic and its conversion rate during the year. This is despite moving away from discount and voucher related traffic drivers, used commonly during FY13, to deliver a premium experience that is in line with stores. A significant driver of this has been the improvement in the service levels offered on the site, which now includes both free delivery and returns, and a later cut-off time for next day delivery, a benefit provided by the new distribution facility in Burton upon Trent. Visitor growth did slow during the year as mobile became a more important channel for the customer, but the recent release of new mobile and tablet sites across most of the Group's international websites puts the business in a strong position to return to historical growth rates.

The average order value (including VAT) rose 8.7% to £78.90 (2013: £72.59), driven by a combination of the growth in international business, product mix and around 2% growth in the average number of items per basket.

Following the opening of websites in China and the USA over the last 12 months, the Group operates 18 international sites in 15 countries, all with localised payment solutions, localised content and local currency pricing; three of those have two separate versions for multi-language populations. 13 of those sites also have mobile versions with development underway to extend that to others.

During April 2014 the Group appointed Jon Wragg as Director of e-commerce. Jon has extensive retail experience, having recently been Multichannel Director at Asda and previously holding a number of management roles at the multi-brand online retailer, Shop Direct. E-commerce continues to be a significant global opportunity for the Group and Jon's experience and insight, coupled with the investment already made into world-class delivery services, should generate significant growth over the medium-term.


Wholesale revenues represented 33.7% of total Group revenue and grew 23.3% in FY14 to £145.4m (2013: £117.9m).

Due to the numerous channels within the Wholesale business and the timing issues these generate, sales growth on a quarterly and half-yearly basis can be volatile. To counter this, the Group chooses to disclose the Wholesale order book each season, which it believes best reflects the overall performance of this channel. For FY14 the order books grew by an average of 25.9% which closely reflects the Wholesale sales growth rate.

During the year, the Group opened 59 franchised stores and four licensed stores taking the totals to 185 and 23 respectively. The lower net increase of 46 is due to the transfer of seven franchised stores into Retail after their acquisition through the buyout of the agency and franchise partner in Germany, and ten closures. Of the new stores opened, 29 were in Europe, with nine of those in France and eight in Spain. The Group now has a store presence in 46 countries with franchised stores having opened in two new territories during the year: the Czech Republic and Latvia.

Early indications are that franchise partners will open around 50 stores during FY15 but, more importantly, franchise partners are contracted to open in excess of 200 further stores over the next five years.


The Group successfully delivered the rationalisation of its retail warehouses having relocated its retail logistics operation to a single 500,000 square feet distribution centre at Burton upon Trent. Two warehouses in Gloucester and a small site in Merchtem, Belgium, were all closed by the end of the financial year with all retail inventories, including e-commerce, now being dispatched from the new distribution centre. The operational capability of this site will support the planned growth for at least the next five years and will generate significant cost efficiencies from the second quarter of FY15.

The replacement Merchandising Management System ("MMS") was fully implemented prior to the year-end. This system is the 'engine-room' of the Retail business and will allow the business to improve the management of its most important asset, stock. The additional insight and power the system offers will allow the Group to operate a more swift and sophisticated replenishment operation, manage the ever growing complexity of a geographically spread store base, and provide more integrated support for the Group's multi-channel operations. This is particularly important in a rapidly changing customer environment where the digital and physical environments are becoming increasingly blurred.

There has been significant investment in information technology ("IT") over the past year. As well as implementing the MMS system, the Group has introduced new human resources and payroll systems. Preparations are now underway for the next phase of planned investment which will include the delivery of a new in-store point of sale system, a replacement financial system, and a comprehensive upgrade of the Wholesale system over the next 12 months.


Whilst the youth sector marketplace remains competitive, the Group has developed a strong management team and improved infrastructure whilst delivering sales and profit growth that highlight the continuing appeal of the brand. That platform will enable management to continue to realise opportunities, both in the UK and overseas, and to deliver profitable growth in the coming year. The Group will announce its Quarter 1 results and autumn/winter Wholesale order book, as scheduled, on Thursday 4 September 2014.