Superdry shares could see short-positions build, says IG analyst

• Superdry set to unveil full-year earnings in September
• Fashion retailer could see short-positions build against it, says IG analyst
• Superdry strengthens balance sheet with new lending facility

Superdry could see its share price come under renewed pressure as investors grow increasingly concerned about rising Covid-19 cases that threaten another national lockdown during the winter months.

The fashion retailer is expected to unveil its full-year results later this month, with investors eager for an update on the company’s performance after it was forced to pull out of its joint venture in China, costing it £6 million in write-offs.

‘I believe that China represents a huge opportunity for Superdry in the longer term,’ Superdry CEO Julian Dunkerton said. ‘As the way people are shopping there changes, it makes sense for us to shift our focus to the growth channels of online and wholesale.’

‘Combined with the improvements we are making to our product ranges, I am confident that this is the right time for us to take back full control of our brand in China and to re-position our operations in the region to deliver profitable future growth for Superdry,’ he added.

Superdry is trading at 163p per share at the time of publication, with the stock down 68% year-to-date.

Superdry secures new lending facility to strengthen balance sheet

Earlier this year, the clothing retailer announced that had agreed a new £70 million lending facility to help it strengthen its balance sheet amid the fallout from the coronavirus pandemic, which adversely impacted its sales.

‘The actions we have taken to date have greatly strengthened our cash position, which together with our new ABL Facility, give us the flexibility to execute our current plans and to secure our recovery,’ Dunkerton said.

‘Together, we are making our way through this unprecedented period, and I'm confident we can reset the brand and deliver on our transformation plans,’ he added.

Superdry: technical analysis

Superdry shares have seen their recovery from March stall of late; April’s peak at 176p remains a level that refuses to be broken on any sustained basis, according to Chris Beauchamp, chief market analyst at IG.

‘The brief bounce above here in early June was quickly rebuffed. At least support at 110p has continued to hold, but for now there seems little prospect of a move higher,’ he said.

‘As the shares approach the top end of the current range we may see bullish momentum ebb and a building of short positions,’ he added.

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