Overall Australian Retail Landscape
The past few years have been quite challenging for the broader retail sector in Australia that has been slackening, as the consumers pulled back on spending and household finances remained distressed amidst stagnant wage growth and reduction in wealth (due to crumbling house prices). The shift in consumer preferences from high-street and departmental stores to online shopping across the global retail sector landscape has posed noteworthy headwinds for large retailers and real estate groups owning malls and shopping centres, as the e-commerce giants have been gradually eating away their profits and impacting retail sector players’ valuations.
According to Retail Trade data released by the Australian Bureau of Statistics (ABS) for the month of August 2019, the trend estimate for the country’s retail turnover was up by 0.1% following an increase of 0.2% in June and July 2019. Meanwhile, the seasonally adjusted estimate was up 0.4% after staying relatively stagnant in July 2019, and a rise of only 0.3% in June 2019.
Although, in trend terms, Australian retail turnover was up by 2.3% in August 2019 compared to the prior corresponding period, driven by clothing, food retailing, footwear, household goods retailing, while cafes, restaurants & takeaway services and department stores remained on the downtrend.
Yet, some market experts believe that the month of August 2019 did not witness a meaningful improvement in spending despite the scale of the policy stimulus to boost disposable income, thus, falling short of market expectations. On the other hand, few other market participants are of the view that even a slight uplift in the figures is a positive indication for further recovery in the retail sector across Australia.
How is Super Retail Group Sailing through this Phase?
Leading consumer discretionary company, Super Retail Group Limited (ASX:SUL) is the proud owner of four iconic brands namely Rebel, Supercheap Auto, BCF and Macpac with a network of 690 stores and operations in Australia, New Zealand and China. Each of the company’s brands have established market leading positions in the growing high involvement lifestyle categories of auto, sports and outdoor leisure.
SUL has a market capitalisation of around AUD 1.77 billion. On 25 October 2019 (AEST 02:59 PM), the SUL stock was trading at AUD 9.315, up 3.962% from its previous close. The stock has delivered a negative return of 5.58% over the last three months.
However, it is evident that the retail sector performance is improving across the country and Super Retail Group delivered solid financial results for the year ended 29 June 2019 (FY19), despite a difficult retail environment and subdued economic conditions. Even the latest business update for the month of October 2019 is a testimony to the Group’s resilience and growing upward momentum in its overall performance. Thus, the outlook for the Group remains bright in the upcoming months.
Let’s look through the Group’s latest business update and financial results for FY19.
October Trading Update- At the Annual General Meeting (AGM) held on 22 October 2019, Super Retail Group informed the market that in the first sixteen weeks of FY2020, the Group delivered total sales growth of 4.2%, while like for like sales registered an increase of 3.2%. The Group’s sales growth across its four key business segments is summarised below-
Super Retail Group Managing Director and Chief Executive Officer, Mr Anthony Heraghty commented that the Group made a solid start to the year 2019/2020. Even though, there has been a retraction in consumer sentiment throughout, the Group managed to perform well, delivering strong sales growth and like-for-like sales growth across its three key well renowned brands. In fact, Super Retail initiated a higher level of promotional activity for its business in response to a cautious consumer, which turned out to be extremely successful, supporting top line growth but slightly impacting margins.
Specifically, the Macpac segment is cycling a strong sales performance in the previous corresponding period. Also, the segment’s like for like sales reflect refinements to the Group’s promotional and pricing strategy, as it aims to strike the right balance between sales and margin.
The Group is confident about its Macpac segment and its potential to continue delivering a strong shareholder value as new stores are opened, digital sales expand, and the Group’s brand awareness increases in the Australian market.
FY19 Results Recap – Super Retail Group announced net profit after tax (NPAT) attributable to owners for the 52-week period to 29 June 2019 of AUD 139.3 million. After adjusting for items not included in total segment net profit after tax, normalised net profit amounted to AUD 152.5 million.
The key features of the results include –
- Total Group sales of AUD 2.71 billion, an increase of 5.4% on the previous comparative period (pcp).
- Group like for like sales growth of 2.9% with all divisions delivering positive like for like sales growth.
- Group segment earnings before interest, tax, depreciation and amortisation (EBITDA) of AUD 314.7 million, an increase of 7.0% on pcp.
- Segment depreciation and amortisation increased by 16.2% to AUD 86.6 million, reflecting investment in omni- retail model.
- Group segment earnings before interest and tax (EBIT) of AUD 228.1 million, an increase of 3.9% on pcp.
- Normalised NPAT of AUD 152.5 million, an increase of 5.0% on pcp.
- Strong operating cashflows supporting an AUD 36.2 million reduction in net debt.
During the year, Super Retail Group grew its active loyalty club membership to over 6 million members, who represent over 56% of sales across the Group. The Group looks forward to get closer to the customers by refreshing its loyalty programs and utilising customer data analytics to make more tailored and personalised offers.
The Group’s Board also paid out an ordinary fully paid dividend of AUD 0.2850 (Record Date: 26 August 2019; Payment Date: 26 September 2019), relating to the six months’ period to 29 June 2019.
Super Retail Group is well placed with its growth strategy to benefit from the improving retail environment in the country. The Group is witnessing better decision-making and strengthening of a range of management functions, on the back of flourishing data-led intelligence technologies. SUL has made significant progress in building a stronger omni-retail business, that will further drive for sustainable growth for enduring long-term success.
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.