Superdry said on Wednesday that it's facing "unprecedented challenges" from COVID-19 and has temporarily closed its doors in a number of countries.
It also issued a profit warning as it won't meet the guidance it gave on January 10. And given the current uncertainty, it’s issuing no formal guidance to replace its earlier forecast. That said, the informal and approximate sales guidance it did give show just how bad the situation is.
After its trading update in early January and before the global outbreak of the coronavirus, it had been expecting to generate between £5 million and £6 million in sales every week for the rest of the financial year.
But as of today, 78 of its shops across Europe are affected by government-mandated closures and this accounts for the majority of its European store estate. These stores usually contribute around 40% of the sales in its weekly forecasts, so that's at least £2 million to take out of the equation.
Its shops in the UK and the US remain largely open but it said: "footfall has been significantly impacted, reducing on average [around] 25% week-on-week, as governments and customers take increasing measures to contain the spread of the virus”.
The UK market represents around 50% of its weekly sales and the US around 10%. If you take all of the above together, it's very clear that the company’s sales in its physical shops are being devastated at present.
And while e-commerce is making up for some of the shortfalls, the company said it doesn't expect it to fully mitigate the lost sales. It's also pursuing cost-saving measures across its business, but again, it doesn't expect this to be enough to counteract that sales decline.
So does this mean the business is going to be in a difficult position as far as its funding is concerned? It seems not. The company said on Wednesday that it currently has a strong position of £47 million net cash on its balance sheet and its working capital performance to date has been better than its forecasts.
It's continuing to work closely with its wholesale partners to minimize returns and cancellation risks on SS20 stock deliveries.
It's also talking to landlords about store rental relief, postponing capital expenditure plans and making potential changes to the timing and structure of the future season stock buy. In addition, it’s talking to its existing lending group “to provide additional flexibility and liquidity to support Superdry through this period of uncertainty”.
CEO Julian Dunkerton said: "We are taking mitigating action wherever we can but the situation is very fluid and uncertain, and we are working to put in place additional financing to secure our recovery. The safety of our staff and customers remains our number one priority and we continue to take all appropriate action in line with local government advice. Together, we're going to make our way through this unprecedented challenge, and I'm confident we can reset the brand and deliver on our transformation plans."