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Shares in Superdry rose more than 4% on Monday after the activist investment firm Gatemore Capital disclosed that it had amassed a 3.37% stake in the U.K. fashion retailer, which it said is well positioned to benefit from changing consumer trends triggered by lockdowns.
“Superdry has shown strong resilience despite a challenging trading environment in recent months, and we are confident the business is poised to benefit from the trend toward casual wear,” Liad Meidar, managing partner of Gatemore, said.
Superdry’s stock SDRY, +5.64% was up more than 5.4% in midafternoon trading in London at 116 pence a share.
SuperDry co-founder Julian Dunkerton, the company’s biggest shareholder, won a bitter six-month battle to rejoin the retailer in April 2019, which led to the resignation of the entire board in protest at his return. Since then, Dunkerton has launched a major overhaul of the retailer, refocusing on design and the brand’s identity and scrapping a planned children’s-wear range and a footwear licensing deal.
“We are fully supportive of Julian’s vision for the company, including returning the brand to its design-led routes and Superdry’s strong commitment to sustainability. We look forward to discussing our views further with the board, management, and other shareholders over the coming months,” Meidar added.
Gatemore said the company’s stock has 300% to 500% upside, driven by significant growth in free cash flow over the next two years.
The investment firm is pressing to regain control of the branded franchise stores in China. In June, Superdry took back full control of the Superdry brand in China, ending a four-year-long joint venture with 25 owned and 41 franchise stores. The company said the move, which followed a review of the retailer’s long-term business strategy in China, will cost it £6 million, half of which will be recognized in the first half of the current financial year.
Read:Superdry founder becomes permanent CEO to lead turnaround
The company has emerged from the lockdown period with a significant amount of cash on its balance sheet and its product range well-positioned to benefit from the trend toward casual clothing which has accelerated amid the COVID-19 pandemic.
In May, Superdry said that it won’t pay a dividend for fiscal 2020 and that it expects full-year revenue to fall significantly as the pandemic cut into sales in the fourth quarter. However, it said it expected 75% of its stores to be operational by the end of the month as it unveiled plans to reopen its franchise outlets.
