Founders - return or not? - that is the question!

Founders - return or not? - that is the question!

There is a new trend in fashion retail and it’s not a colour, style or look - instead it’s playing out in retail boardrooms across the country.

Tomorrow (Thursday 8th November) when Superdry give their half yearly trading update it will be one of their busiest and most anticipated results announcements ever… Why?

Because their founder (and largest shareholder) Julian Dunkerton having fully exited the business back in March is currently in the middle of something of a boardroom coup as he tries to take back control of the fashion business he founded in 1985.

The Telegraph reported this weekend that Mr Dunkerton claims to have met eight of Superdry’s 10 largest shareholders over the last week as he stepped up his campaign to oust chief executive Euan Sutherland. He also held talks with two leading activist fund managers with a view to gaining their support. Mr Dunkerton himself said; “I’ve had no pushback on any of the logic,” he said. “There has been a seismic shift in understanding the opportunities this business has to offer.”

Mr Dunkerton has been prompted to return to Superdry and abandon his well publicised plans for enjoying new challenges because of the very public devaluation of the business. The Superdry share price has fallen steadily this year, down from over £2K in January to around £870 today. For a founder who built the business from humble market stall beginnings to floatation in 2010 with a reported market capitalisation of £1 billion, it is understandable that he feels he is the best person to step back in to halt the current decline, even making it known that he doesn’t agree with the strategy being adopted by the current management team.

Superdry have in recent months created a new role of Chief Product Officer and have recently announced the launch of a new instore Superdry Preview Range - aimed at a younger more fashion conscious customer to compete with fast fashion brands. Whereas Dunkerton’s proposed manifesto is to reduce the number of items sold in store and to broaden the online offering.

Superdry Share Price 2018

And he is not alone, In the UK retail market we’ve seen multiple retailers bring founders back to a struggling business, with some outcomes more successful than others. Linda Bennett bought her way back into L.K. Bennett in late 2017 with an aggressive growth plan that put the business back on track whilst Stephen Marks set up French Connection in 1972, floated it in 1984 and then regained directorial control in 1991 and subsequently transformed the brand image with the iconic FCUK advertising campaign.

Why do founders get brought back in to save the day and why do they leave to begin with?

The founder of a brand who has put in the hours, sweat and tears to build it will always remain its most passionate advocate with the best understanding of the brand and its customers - their passion is what made the business successful to begin with. However, somewhere along the way some reach a stage where in order for the business to grow the introduction of a fresh perspective or a different skill set is required.

There are loads of different reasons why a founder might decide it’s time for someone else to take the wheel, maybe the performance is faltering, maybe they need help to grow the business in line with its potential or maybe they have been offered a nice financial exit. Whatever the reason, bringing in experienced staff to accelerate growth and create a new future for the business is a common occurrence in retail.

Time and time again this approach has created successful flourishing businesses that remain competitive, maximising on growth opportunities by leveraging experience from the best in the business. But, the knowledge, understanding and passion of a founder for brand and customer is hard to replicate and therefore businesses who lose a founder risk falling out of favour through a disconnect between brand and customer which is always retail suicide.

A drop in brand popularity, sales, profits even share price can be an indicator that a retailer needs to reconnect with their customer and if so one obvious solution may be to call on the founder (or as with Superdry, the founder calls on the board to seek to realign the brand/product and the customer.)

As Superdry founder Dunkerton himself says of his attempt to rejoin the business; “I have no long-term ambition to be the CEO. What I want to do is be the product and brand director. That’s my ambition.” Dunkerton knows that’s where his experience and expertise as a founder will add most value - sadly at present the existing Superdry board are at odds with him over what the product and brand strategy should look like thus the boardroom battle being played out in the media.

A drop in brand popularity, sales, profits even share price can be an indicator that a retailer needs to reconnect with their customer and if so one obvious solution may be to call on the founder (or as with Superdry, the founder calls on the board to seek to realign the brand/product and the customer.)

The power of having a strong brand with a product that matches customers’ wants cannot be underestimated and the determination to succeed coupled with the understanding of the business that a returning founder brings means that they are often the best (some may say only) person who can turn around an ailing retailer.

Dunkerton is in a unique position - not only did he found Superdry but he is still the majority shareholder with approx 25% of the business (even following the sale of 6.7% of his shares back in July).

Tomorrow looks sure to be an interesting results meeting and all eyes will be on the boards next move - will Dunkerton be allowed to return to reshape the Superdry brand story and would it be the brands best move? Would love to hear your opinion.

Richard Magnusson

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