Being asked about Brexit is such an occupational hazard that one colleague of Lombard’s gives different predictions to different people — so at least some will think he was right all along. But if, in reality, political journalists cannot know the outcome, how can consumer-facing companies make sensible business decisions?
In recent days alone, an airline, a travel group, a broadcaster, a clothes retailer, car dealers and various drinks sellers have had their performance hit by Brexit uncertainty. On Monday, however, a café-dining chain decided now was the optimal time to list its shares on the London market. What can it know that nobody else does?
In Britain, neither travel nor leisure has been a business to be in. EasyJet has just warned it expects a worse first-half loss of £275m, as “unanswered questions surrounding Brexit” have hit demand for flights. Thomas Cook has cut its TV spend by 74 per cent so far this year, industry figures show, having warned of “consumer uncertainty, particularly in the UK”. ITV’s earnings will fall faster than forecast, Liberum analysts have said, because advertisers like Thomas Cook “are holding back on advertising decisions until there is greater clarity on . . . Brexit.” Moss Bros has admitted “Brexit negotiations have created a prolonged period of uncertainty”, even in the business of dressing up to go out. Car dealers have told finance provider Close Brothers that Brexit is a “a negative influence” on 48 per cent of buyers — although seemingly not the 52 per cent who will now have to import a new Nissan or Honda. Even prosecco sales are down, accountants UHY Hacker Young have noted, possibly because Brexit gives “fewer reasons to celebrate”.
Is it just “Project Fear” covering up for frightfully bad projections? Probably not, with Goldman Sachs calculating that Brexit-related cuts to “investment and private consumption” have cost the economy £600m a week since the 2016 EU referendum.
Yet, despite this, all-day café-dining chain Loungers has announced a share placing valuing it at up to £300m, or 18 times adjusted earnings — in a sector where casual dining shares trade on half that, and many outlets have ceased trading altogether. Giraffe, Jamie’s Italian and Gourmet Burger Kitchen have all closed sites, while the listed Restaurant Group and EI pub chain are valued on 9 or 10 times 2019 earnings.
Loungers argues none of these is a competitor or comparator, as its all-day concept attracts different demographics for coffee hour, lunch hour and cocktail hour. Analysts agree this “something for everyone” model has worked well in market towns of about 25,000 people, as well as suburbs — giving it a growth potential that is being realised at a rate of 30 per cent a year. Some say scale will offset relatively low earnings per site. But a £300m valuation assumes this model can keep on working in ever more pro-Brexit towns. And if there is one political lesson to be learnt in recent weeks, it is that you cannot try to be all things to all people . . . at least, not for very long.
Dunkerton: dry whine
Julian Dunkerton flounced out of Superdry a year ago, writes Kate Burgess. He sold some of his stake in the business he had co-founded when half-zip hoodies and indecipherable Japanese characters were still edgy. And he has since told shareholders that he felt sidelined by the board and Euan Sutherland, whom he had recruited to replace him as chief executive in 2014. He was so fed up then that he would have sold all his shares, if he could.
Now though, he is asking shareholders to return him as a board director and head of product and design. Mr Dunkerton accuses management of abandoning the brand he created with James Houlder, and of alienating core customers.
He says Superdry has lost its way — by which he means his way.
He has a point. Superdry had a terrible winter season and its margins have shrunk pitifully. Its share price is now a quarter of what it was two years ago. It has been slow to adapt to new fashions, and lost momentum online.
In turn, the board, which threatens to walk out en masse if Mr D returns to Superdry, blames Mr D for smothering creativity when he was in charge of the product. It was his line up of trademark jackets that failed to sell during the mild winter, the company argues.
All of which proves the point that Superdry has been left behind by rivals that have developed lightning responses to changing fashions and customer moods.
Neither faction in this battle promises a quick or certain turnround. However, voting in Mr Dunkerton would be exponentially disruptive.
His words about returning Superdry to its “design-led roots” come from the heart. But the company needs a head — and one unfettered by the past, with a strategy for coping with the high street’s gritty decay.
Mr Dunkerton, who by his own admission does not want the top job, may not find any willing CEO recruits, given how he has fallen out with his first choice.
matthew.vincent@ft.com
Superdry: kate.burgess@ft.com
