Superdry, Dixons Carphone offer valuable prospects in new year despite lockdown woes, says broker


Superdry PLC (LON:SDRY) and Dixons Carphone PLC (LON:DC.) offer deep value and strong balance sheets despite their troubled past, according to broker Liberum.

The clothier, whose half-year results are scheduled for later this month, saw its shares plummet 50% in 2020 despite a rally since late November.

READ: Superdry in board reshuffle as founder becomes permanent chief executive, chairman to leave

Analysts said there is very strong valuation support, with the year ending in April expected to see stock of GBP131mln and net cash position of GBP21mln, amounting to three-quarters of the current market capitalisation.

The faux-Japanese designer is expected to see better product, supporting the new full-price stance, store optimisation including doubling the option count and rent reductions, more effective marketing and cost savings targeting a leaner more profitable business.

Similarly, Dixons Carphone’s shares fell 20% in 2020 on an already depressed valuation, despite a very resilient electricals performance during COVID-19, including the latest half-year results.

According to the broker, balance sheet strength was an important highlight, with management noting that if decent trading continues then net debt could be eliminated by the year-end, while the improving multi-channel offer and services overlay underpins the turnaround that remains on track.

As tighter restrictions mount, store-based retailers are expected to be impacted, though the new year is up against some very weak comparatives from 2020.

“‘Normality’ should start to resume from Spring (we hope) providing a distinct year of two halves,” Liberum commented.

“There were some significant share price gains in the second half of 2020, but this year look out for earnings to start to catch up in the second half of 2021 and continued share price momentum as a result.”

A tiered Christmas

Looking at the festive period just ended, fellow City broker Peel Hunt noted that the trading performance could not be less relevant to the sector and share price outlook.

“With few liquidity concerns, the profit and cash impact of November’s lockdown and Tier 4 restrictions should be bearable for most,” analysts noted.

“The key metrics aren’t so much December like-for-like, but rather customer relevance and market positioning.”

“Our focus is on market position; retailers gaining active customers and market share are set to accelerate their performance over the next two-to-three years, much of which is being ignored by conservative forecasts that are anchored to slow lockdown recovery rather than active customer numbers.”

In this sense, analysts favoured those companies with an accelerating active customer base, such as AO World (LON:AO.), boohoo (LON:BOO), Dunelm (LON:DNLM) and Pets at Home (LON:PETS).


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