Superdry braces for boardroom showdown as shareholders vote on founders return

The board of fashion chain Superdry PLC (LON:SDRY) will be in a tense mood on Tuesday as shareholders vote on whether to re-appoint founder and former chief executive Julian Dunkerton.

Dunkerton, who set up the company in 2003 and with co-founder James Holder controls around 29% of the company shares, convened the shareholder meeting in early March with the aim of re-appointing himself to the board while also bringing on Peter Williams, the chairman of online fashion retailer Boohoo Group PLC (LON:BOO).

READ: Superdry founder Julian Dunkerton vows not to sell stake if he is voted back on the board

The move came after Dunkerton said “urgent action” was required to address the sharp decline of the company’s share price, which has fallen around 65% in the last 12 months and seen the firm demoted from the FTSE 250.

Dunkerton has blamed the deterioration on the “misguided strategy” of the current board and that after having proposals rebuffed privately for several months, there was “no choice but to let shareholders decide the best outcome”.

If re-appointed, he would seek to return Superdry to “a design-led business” that would “reinvigorate” the brand.

Dunkerton has also tried to bring shareholders on side by vowing not to sell any of his stake in the company for two years should he be re-appointed.

“Fundamental” disagreements

Dunkerton quit as a director of the company around a year ago over a “fundamental disagreement” about future product design and the company’s international expansion plans.

Since his resignation, the company and its shareholders have suffered through two profit warnings and a weak set of third-quarter results in early February, as well as being the only retailer among its peers to report a fall in online sales for the autumn/winter period last year.

“We have all waited and suffered long enough: the time to act is now,” Dunkerton said.

He has also taken a swipe at the incumbent management, nothing that current chief executive Euan Sutherland’s pay packet was £3.2mln last year despite the firm also announcing a £20mln cost-cutting drive.

Board strikes back

While his intentions may be pure (at least to himself), Dunkerton’s plot to re-insert himself into the business has not gone down well with he current board, who have threatened to quit en masse should he re-join.

In a statement on 14 March, the board said Dunkerton’s return would be “extremely damaging”, with chairman Peter Bamford saying the issues he raised had already been addressed.
“There is little new information and no clear articulation of the proposed strategy or action plan”, he added.

READ: Superdry looking to cut about 20% of jobs at its head office as struggling fashion brand attempts to rein in costs

Superdry’s bosses have also dismissed Dunkerton’s proposed sales strategy and criticised his leadership, claiming he had “prime responsibility” for the autumn/winter 2018 range which didn’t sell very well.

The group has also announced plans to cut around 20% of the jobs at its head office in order to rein in costs and fight off Dunkerton’s insurgency.

Shares “in for a bumpy ride” whoever wins, says broker

In a note to clients, analysts at broker Peel Hunt said regardless of whether Dunkerton was re-appointed on Tuesday the shares would be “in for a bumpy ride” as the company would be in the middle of a turnaround regardless of who took control.

“We don’t believe that this lack of innovation suddenly manifested itself in the one autumn/winter season since [Dunkerton] left the business – this has been building for a while”.

If Dunkerton did succeed, the broker said the company would be in an 18-month turnaround and that “forecasts will come under pressure and there will be management disruption and change”.

However, they added that if he failed the outcome would likely be the same, but the question then was whether he would come back and bid for the company.

In mid-afternoon trading on Monday, Superdry shares were steady at 548p.

Story by ProactiveInvestors