Superdry feels the heat in £18m profit alert

Superdry has warned of an £18m hit to profits thanks to the impact of hot weather on sales as well as foreign exchange costs.

Shares (Berlin: DI6.BE - news) lost 21% of their value on Monday after it said "unseasonably hot" conditions in the UK, Europe and on the US East coast - continuing from the summer into the autumn - had "significantly affected" demand for products such as jumpers and jackets.

Superdry said that this, added to the "well-publicised challenges" faced by some of its trading partners - at a time when the struggles of department stores have hit a number of clothes brands - would adversely impact profits by £10m.

Meanwhile foreign exchange hedging mechanisms - a method used by companies to protect themselves from the impact of currency movements - had not been as effective as expected, leading to £8m of additional costs.

It comes at a time when the pound continues to be buffeted by speculation about Brexit negotiations.

Superdry said the importance of its cold weather product offerings and performance over the latter part of the financial year going into 2019 would now be key to its annual performance.

It also said that the trading update came "against a backdrop of widely reported weaker consumer confidence across its key markets".

Chief (Taiwan OTC: 3345.TWO - news) executive Euan Sutherland said: "Superdry is a strong brand with significant growth opportunities, backed by robust operational capabilities, but we are not immune to the challenges presented by this extraordinary period of unseasonably hot weather.

"We are well prepared for peak trading, but the second half of the financial year 2019 presents both risks and opportunities."

Superdry said it makes around 45% of annual sales from autumn and winter products and 70-75% of its full-year profit is delivered during the second half of its financial year.

The company said it expected to invest £5m in accelerating growth, particularly in digital, during the second half.

It is also diversifying its range to balance out its reliance on winter sales with a bigger range of clothing items.

The wider turbulence in the clothing market has included the collapse of House of Fraser, which left Superdry out of pocket by £236,000.

Other suppliers to the department store such as Ted Baker (Other OTC: TBAKF - news) and Mulberry have in recent weeks flagged the impact of the event on their bottom lines.

Coast, another clothing brand affected by House of Fraser's woes, went into administration last week.

Superdry's profit warning came as the British Retail Consortium (BRC (Shanghai: 600466.SS - news) ) reported an accelerating decline in shopping visits, with footfall down 1.7% in September on the same month last year.

It blamed the "unrelenting pressure on households' budgets" amid sluggish growth in wages as prices tick higher while mild weather meant shoppers saw "little need to update their wardrobes for the colder season ahead".