Superdry; increased to 2.0% of JIC Portfolio

Superdry (SDRY.L FTSE Mid 250, Market capitalisation: £655m, 189p, 2.0% of JIC Portfolio and 0% of JIC Top 10)

I have, just now, added to my position in Superdry

After yesterday’s profit warning and drop in the share price, I felt I should make a decision on whether to cut or add. I could of course have done nothing but I think that the shares look good value on a year’s view. I say a year’s view because in the short term calling the bottom is very difficult. If we end up having a very warm November and December there will be some real bargains in the January sales but results for Superdry will most likely take another hit.

The balance sheet looks fine, it generates cash and is in my opinion doing the right thing in shifting its product mix so that it is not so reliant on “heavies” such as sweat shirts and coats. Focusing on licensing and on-line sales also looks sensible.

On reduced forecasts for the current year ending 30thApril 2019, the shares are valued at under 10.0x earnings and a yield of over 4.0%. It is always dangerous catching a falling knife but in this instance I think the balance of risk is in my favour. Expectations are now pretty low.

This afternoon it is hosting a “capital markets day” in which it will outline strategic progress on its previously announced initiatives - the RFID roll out, customer segmentation, automation and design development.

This will be available on its website shortly afterwards

I paid 791.91p to increase the position back to 2.0% of the JIC Portfolio. I will update website this evening after the market closes.

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