Superdry’s directors didn’t quite describe Julian Dunkerton, the founder who wants to return, as a man obsessed with yesterday’s game of slapping Japanese-style logos on everything in sight, but it wasn’t hard to catch their drift. The founder’s approach would fail. The product range would be “narrow and concentrated” and would ignore “consumer and data insight”. His comeback would be “extremely damaging for the company and its prospects”. The entire board, non-executives included, would quit.
Dunkerton’s response is awaited and one assumes the counter-blast from his Cotswolds hangout will be fuelled with the fury of a man whose 18% stake has plunged in value by £236m since January last year. But, actually, Dunkerton would be well advised to calm down and recognise that, despite starting with 28% of the votes (his design guru James Holder, with an 10% stake, is backing him), he is not favourite to win this fight.
Most heavyweight City fund mangers are thought to be backing the board and, since five of them collectively control 34% of the shares, Dunkerton needs to win over the waverers. To be credible, his alternative vision must be more than a loose grumble about a reduction in the number of products on the internet and a claim that only he can restore the brand to strength.
On the first of those arguments, Superdry says Dunkerton is simply incorrect. On the second, the board’s idea that the brand needs to push into kidswear and sportswear, and become less hooked on Japanese logos and hoodies, reads like common sense. Most brands try to diversify when they reach a certain size. Dunkerton should also explain why he quit a year ago. To argue, as he has done, that he was being cut out of meetings just sounds feeble; at the time, he still owned a quarter of the company, which normally gets one heard.
None of which should be taken as an enthusiastic endorsement of the current chief executive, Euan Sutherland, who has trousered large bonuses in the past two years despite the troubles lurking within Superdry. As things stand, though, the board should win. We’ll reserve judgment until Dunkerton has made his formal pitch, but the founder is up against it. The board has something resembling a strategy; Dunkerton just sounds angry.
Extra borrowing by Debenhams could just spread the misery
Nothing surprises at Debenhams these days – not with Mike Ashley on the prowl – but just pause to consider the department store group’s quietly remarkable statement that it is in “advanced negotiations” to secure additional borrowing facilities worth £150m from its existing lenders.
Since Debenhams is already thought to be maxed out on its current £520m facility, you’d think those lenders would be desperate to put a cap on the borrowing binge at something close to the current level. We are, after all, talking about a retailer that only a week ago issued yet another profits warning and may slip into loss this financial year. But, hey, what’s another £150m when there’s already half a billion on the tab?
There is an explanation of sorts. The banks will be desperate to ensure Debs does not go down before it has had the chance to inflict some financial misery on its landlords in the form of store closures and demands for rent cuts. If the business can be reset, in the restructuring jargon, there’s a hope that a conventionally credit-worthy borrower can be found within the Debs mess. Some form of debt-for-equity swap (yes, bizarrely, even as more debt is taken on) would also help.
The new factor in smoothing the talks may be Ashley’s attempt to get himself voted on to Debs’ board. The banks, landlords and directors will all regard the Sports Direct tycoon’s advance as a threat to their interests, thus they’re more likely to resolve their own quarrels. Ashley as unifying force? It seems so.
Goodbye to the watchdog that didn’t bark
Farewell, then, the Financial Reporting Council. Business secretary Greg Clark confirmed the abolition of the audit watchdog, as recommended by Sir John Kingman’s review, and it is tempting to see a delayed casualty of Carillion. The collapse of the huge construction contractor, complete with its supposedly healthy accounts before crisis struck, was a trigger for the inquiry by the Legal & General chairman.
In reality, the FRC’s failings went back to the financial crisis of 2008-09. As Kingman put it, the body “went through nothing like the same radical soul-searching and reform as its fellow financial regulators”. Quite. The FRC had a chance to improve itself and didn’t take it. The important thing now is that the successor body isn’t the FRC in different clothes.
