What's going on?

The UK �enjoyed� a record heatwave over the summer and it got everybody sweating � including Superdry. The British clothing retailer warned investors on Monday that it�ll make less moolah than expected this year (tweet this), sending its shares down 20%.

What does this mean?

Superdry hangs its hat on keeping customers (super) dry and warm � around 45% of its sales come from cold weather wear. With that cold weather noticeably absent in the UK (where it does nearly a third of its business), continental Europe, and America�s East Coast, it seems Superdry�s customers took a rain check.


As if that weren�t enough, Superdry�s also smarting from currency fluctuations � its hedges, perhaps also wilting in the heat, proved inadequate protection (more below). Altogether, Superdry reckons its annual profit will be some $24 million lower than previously expected. Still, at least things aren�t quite Sears-level bad…

Why should I care?

For markets: Hedging can be complex.

For global companies like Superdry that have sales and costs all over the world, currency fluctuations can be a bit of a pain. They can be unpredictable, making it hard to forecast and budget accurately. So companies often hedge, buying a bunch of currencies that they�ll need in the future ahead of time. This gives them a fixed exchange rate and more clarity over costs � so fluctuations should have less of an impact. But this year, Superdry�s usual hedging arrangements didn�t work out as planned.

The bigger picture: Clothing retailers must adapt or die.

Superdry wasn�t the only one sweltering in the heat � other retailers like Zara and Zalando have been sweating cash, too. Superdry normally makes around 75% of its profit in the second half of the year � i.e. winter in the northern hemisphere. But with winters warming globally, it needs to adapt (as it�s trying to do with a plan to diversify and reduce reliance on winter sales) or die. Then again, it�s not alone…