A British clothier turns its niche into a global wave

 CHELTENHAM, England – When the soccer player and fashion icon David Beckham was photographed leaving Los Angeles airport wearing a brown leather Superdry jacket three years ago, the small company that made the jacket had about 15 stores and was hardly a global brand.

Since then, demand for Superdry’s T-shirts, jeans and jackets with a vintage twist has soared. The company has opened dozens of new stores globally, including one in New York, and in March it defied fickle equity markets with a successful initial stock offering.

Now, Superdry, which currently has about 75 stores worldwide, plans to add at least 20 more stores every year and expand in the United States, Asia and the Middle East. Sales almost doubled over the last year, despite the economic slowdown, as celebrity magazines continued to print paparazzi shots of celebrities including Zac Efron, Helena Christensen and Bradley Cooper wearing Superdry clothes.

Julian Dunkerton, 45, a retailing entrepreneur who co-founded the fashion label eight years ago, says he still cannot quite believe the company’s recent growth.

“The last few years have been incredible,” Dunkerton said during an interview this month at the company’s headquarters, three humble warehouses on the outskirts of Cheltenham. “I’m absolutely flabbergasted.”

Dunkerton and James Holder, a British clothing designer and Superdry’s other founder, said the success was the result of capturing the attention of a niche market – casual fashion for young men. Superdry clothes feature good-quality fabrics, vintage designs, an eye-catching logo and painstaking attention to detail. Even shirt collar stays bear a subtle Superdry logo.

By catering to consumers in their late teens and early 20s, the brand competes with heavyweights like Abercrombie & Fitch. But Superdry items have a price advantage – polo shirts cost 35 pounds, or $52, compared with 60 pounds, or about $90, at Abercrombie.

Holder says the brand even has many customers who are in their 50s, suggesting a broader appeal.

The clothes range from $20 baseball caps to $450 leather jackets, and the company now has an extensive women’s line. One of its best-selling items is a unisex windbreaker with three zips in the front inspired by luggage Holder spotted at an airport. More than a million of them have been sold in two years at 65 pounds apiece, or less than $100.

Superdry is the main brand of Supergroup, which in March became the first retailing company to list shares on the stock market in Britain since the financial crisis started in 2007. Supergroup also sells clothing under the brands 77Breed, inspired by snowboarding, and SurfCo California, with a vintage surf look.

Its success is in contrast to other British clothing companies. For instance, New Look, which is owned by two private equity firms, had to abandon plans to sell shares earlier this year because of falling stock markets.

Supergroup’s initial offering raised 120 pounds million, or $178 million, after demand for the shares exceeded the number available for sale. The shares have risen 4.6 percent since, while Britain’s FTSE 100 share index has fallen 4.3 percent in the period.

Supergroup’s sales rose 83 percent to $209 million in its financial year to May 2. Profit in the first six months of that year was $11.6 million, more than the company made during the entire previous financial year.

In contrast, Abercrombie’s sales fell 16 percent, to $2.9 billion, in its recent fiscal year ended Jan. 30, while its profit from continuing operations dropped 74 percent, to $79 million.

The pace of growth has led some analysts to wonder whether Superdry can maintain
its momentum in the competitive fashion market.

“We’ve seen brands like these emerge before and then die,” said Nick Bubb, an analyst at Arden Partners in London. But he added that Superdry had “done pretty well” so far in managing to increase sales despite the recession.

Jonathan Pritchard, an analyst at Oriel Securities, pointed out that many landlords handed over retailing space to the company for nearly nothing because Superdry stores helped to attract consumers. That meant most Superdry stores were profitable almost immediately after opening, Pritchard said.

Holder acknowledged that fashion was a relentless business. “Complacency is the biggest curse to any brand or company,” he said. “As soon as you take the foot off the gas and assume you’re an established brand, it’s over.”

The company is now looking for new headquarters twice the size of its current one. But the management team – which includes Theo Karpathios, who runs the international business – has retained its entrepreneurial spirit. Holder still signs off on every product design.

Dunkerton’s desire to chart his own business future began 25 years ago. After abandoning plans to become a doctor because his grades were not good enough, he started to buy T-shirts and punk clothes in London to sell them at a market stall in Cheltenham, a two-hour drive northwest of the capital.

In 1985, he opened his first shop, Cult, and expanded with the help of 40 pounds a week from the government’s enterprise allowance program championed by Margaret Thatcher and a 2,000 pound loan from his family. Dunkerton said his aversion to debt led him to repay the family loan within four months; he aims to keep his current company debt-free.

One of the labels Dunkerton sold was Bench, a line of casual wear created by Holder that is popular with the 18-to-25 set in Britain. In 2002, the two entrepreneurs decided to combine Holder’s fascination with Japan and Dunkerton’s love for vintage clothing to create a new fashion label to fill what they saw as a gap in the menswear market.

“We all love vintage, but you put it on and the fit is wrong,” said Dunkerton, dressed in Superdry jeans and a blue Superdry shirt underneath a gray Superdry sweater. “But there’s something that draws you to it. James finds that something and replicates it.”

The Superdry name is the result of a brainstorming session in a Tokyo bar after the two men collected “tons of packaging for food and from shops,” Holder said. “We looked at it and everything was ‘super’ this and ‘super’ that. That inspired us.”

Back in Britain, Holder gave his designs a Japanese touch by adding the words “super dry” in Japanese letters above the English name to create the fashion label’s logo.

Holder’s team is currently putting the finishing touches on a design for socks. Men’s fragrances are scheduled to hit the shelves by Christmas and there are plans to add swimwear and tailored suits.

Karpathios, a Greek clothing entrepreneur who met Dunkerton when he supplied the Cult stores in Britain with Lycra leggings from Greece, is overseeing an expansion plan that includes the opening of 13 stores in the United Arab Emirates, one each in San Francisco, Las Vegas and Miami and some more in South Korea, Hong Kong and Taiwan.

Dunkerton said he hoped the initial share sale would help to turn the company into a “global phenomenon.”

“People said to me: ‘Julian, you were just lucky,”’ he said. “But I’ve been hearing this for a long time now.”

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