The Superdry share price has crashed 20%. Here’s what I’d do

first_img Image source: Getty Images “This Stock Could Be Like Buying Amazon in 1997” Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. 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Simply click below to discover how you can take advantage of this.center_img See all posts by Alan Oscroft Six months ago, I was wondering whether Superdry (LSE: SDRY) might be a worthwhile recovery candidate, seeing as founder Julian Dunkerton had ousted the board, regained control as chief executive, and set the company back on its original path — a path that I thought was the right one.But I steer clear of recovery candidates these days, especially ones whose business development I don’t really understand, after the agonising failures we’ve seen in the past few years.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Still, after bottoming out around the middle of August, sentiment started turning and, as of a couple of days ago, the shares had put on around 35%.WarningBut that recovery came to an abrupt halt Friday, as the price crashed by 24% when the market opened, before regaining a small amount to sit on a drop of 17% at the time of writing. The fall was so severe it undid all of the 2019 recovery… and then some, setting a new 52-week low for the stock.The trigger was a rather dramatic profit warning issued as a result of a disastrous Christmas trading period. While Black Friday had apparently gone well, since then retail sales had come in below expectations at only £23m as, in the words of the company, “we continue our strategic transition to a full price stance.” It seems people are happy to snap up Superdry clothing at a knockdown cost, but that suggests it might be harder than anticipated for the brand’s target to get back to a premium pricing level.But the thing that’s really hit the share price is the effect that shortfall is expected to have on full-year profitability.No profit?Analysts were expecting to see around £40m this year, but that could now be completely wiped out. Superdry’s new guidance for underlying pre-tax profit indicates a potential range of £0-10m. Yes, zero. There might be no profit at all.The high level of promotional activity in the period running up to Christmas was responsible, according to Dunkerton. But hang on a minute… did he really not expect that at Christmas? It seems obvious to me shoppers will prefer to buy the brands being sold at discounted prices in the fight for the festive pound, and those going for full-price high-margin sales are going to suffer, unless they have real appeal.He did add that “our disciplined plan to reinvigorate the brand and return Superdry to sustainable long-term growth is on track,” but it looks like it’s going to be a longer track than expected.Full-price folly?I did think it a bit strange to see Superdry proposing a dividend this year, before the company’s recovery plan has had a chance to show any success, even if it was expected to be modest. Had a quick return to a full-price brand status been feasible, paying cash to shareholders might have been fine. But the firm seems to have misunderstood current shopping habits, and the idea of paying dividends before cash flow plans have been realised now seems folly.Superdry, for me, is very much a ‘hands off’ stock, at least until we see if customers will go along with Dunkerton’s ambitions — or if Superdry is a has-been as a desirable mid-market brand. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Alan Oscroft | Friday, 10th January, 2020 | More on: SDRY Enter Your Email Address The Superdry share price has crashed 20%. Here’s what I’d dolast_img read more