Cowell will “own and use the Superdry brand in key APAC markets, starting with its home market of South Korea and extending to others including China”. 

But Superdry will retain rights to the brand in India, Bangladesh, Pakistan, Sri Lanka, Australia and New Zealand and despite selling the rights for the other APAC markets, it will have close involvement with Cowell, the two “working together to develop products relevant for [the APAC] markets”.

Superdry also has a right of first refusal to buy back the assets if Cowell wishes to sell or allow any IP registrations to lapse. And it retains the right to continue manufacturing in the APAC region and to fulfil its obligations with existing long-standing wholesale relationships there until their expiry, “enabling Cowell to focus its initial attention on developing the Superdry brand and presence in South Korea”.

The British company said it plans to “build a collaborative partnership with Cowell, capitalising on the shift in consumer preferences in Asia towards lifestyle product, by working with [it] to design and develop market-relevant product which remains consistent with the Superdry brand heritage”.

It will also provide Cowell with “certain support and know-how” relating to the brand in the first two years after the sale for an additional management fee of $1 million.

Superdry co-founder and CEO Julian Dunkerton

And Cowell Fashion Chairman Lee

TURNAROUND CONTINUES

The deal — which still needs to get approval from Superdry’s shareholders and its lender — comes as the company continues to work on its turnaround with its progress having been somewhat slowed by the current cost-of-living crisis. 

Superdry believes the deal “will provide the best opportunities for the future growth of the brand in the APAC region and allows the company to focus on growing its brand and increasing sales in its more established territories where it has strongest expertise.”

That makes commercial sense. Despite the agreement handing the growth potential of the brand in a key region to Cowell, the challenges for Superdry itself to realise that potential are huge.

It had previously announced its exit from the Chinese market, following an “amicable agreement with its former partner, which was finalised in 2020 after material losses were incurred and has no plans to re-enter the market itself in the foreseeable future”. 

And despite its continued presence in a number of APAC territories, “significant further investment would be required to rebuild the company’s previous scale and volumes across the other territories in the region, particularly in China, and the company believes this is more likely to be successfully delivered through a third-party partner”.

In the last full financial year (to the end April 2022), the IP assets being sold generated 1.2% of total group sales and contributed revenue of £7.4 million and profit before tax of £2.5 million, excluding centralised costs allocation. 

Superdry said it expects to receive total proceeds of approximately £34 million net of transaction costs and tax. This will be used “to increase the strength of the balance sheet, boost liquidity, and fund its ongoing working capital requirements, including the implementation of a significant cost reduction programme”. 

As mentioned, the company also said it’s “considering additional steps to further strengthen its balance sheet in connection with its turnaround programme, which is being delivered in a challenging market, which could include a potential equity issue”.