The flat retail sales growth: How are these ASX retailers performing-KGN, SUL, KMD?

  • Dec 06, 2019 AEDT
  • Team Kalkine
The flat retail sales growth: How are these ASX retailers performing-KGN, SUL, KMD?

The retail sector is one of the fastest growing sectors in Australia which is growing at a mid-double-digit growth rate in percentage terms. The demographic profile and economic growth drive the global retailers to plan an international venture. Big Box retailers are facing a pressure due to changing environment and customer demands. In the recent times, sales in Australia fell unexpectedly, predominantly due to fall in New South Wales and Queensland. Busier lifestyles and the longing for better shopping experiences are progressively leading Australians to choose smaller stores nearer to their homes and workplaces over big box outlets in less accessible locales.

Therefore, even iconic businesses are facing a huge competition. The concept of Black Friday though, encouraged sales. The near-term outlook therefore looks brighter with numerous factors, for instance growth in E-commerce, working in favour. Noticeably, millennials shop in a very different manner than the other generations. Likewise, the motivation for shopping differs in different people. The more price aware customers value service with a hassle-free experience.

Let’s look how retailers are performing in Australia-

Kogan.Com Ltd (ASX: KGN)

Kogan.Com Ltd is an online retail which is a mix of retail and services businesses, earning its majority of revenue and profit through the sale of goods and services to Australian consumers.

Significant Rise in NPAT: In the recently held Annual General Meeting of the company, the top management addressed the shareholders and stated that the company performed well with NPAT (Net Profit After Tax) up by 21.9% to $17.2 million in FY19. As a result, the Board declared a fully franked dividend of 14.3 cents. During the first quarter of 2020, the company reported a strong balance sheet including cash of $7.2 million and an undrawn $30.0 million debt facility.

Financial Performance (Source: Company’s Presentation)

For the quarter ended 30 September 2019, Gross Sales grew by more than 16% on prior year and the company will continue to execute long term plans to drive better value and choice for its customers.

Exclusive Brands growth: Exclusive Brands growth rate increased YoY and has received positive responses from both sellers and customers. During the year, the growth rate in exclusive brands went up on year on year basis from Strong competitive advantage, control of the end-to-end supply chain and many more. In the upcoming years, the company expects deeper market penetration with expansion in new portfolio business. It also plans to launch Kogan Mobile New Zealand, Kogan Money Super, Kogan Money Credit Cards, and Kogan Energy

Stock Performance: The stock quoted $7.150, down by 0.9% on 6 December 2019. As per ASX, the stock of KGN gave a return of 36.74% in the past 6 months and the return of 12.46% in the last three months. The constant increase in returns led the stock price to trade very close to its 52-weeks’ high level of $7.920. The market capitalisation of the company stood at $678.3 million and is earning a dividend yield of 1.98%. In terms of valuation, the stock is trading at a P/E multiple of 39.350x.

Super Retail Group Limited (ASX: SUL)

Super Retail Group Limited operates in specialty retail stores in the automotive, tools, leisure and sports categories.

Financial Highlights: In the recent Annual General Meeting of SUL, the top of management of the company stated that the group delivered a solid result for the financial year 2019, with total sales growth of 5.4% to $ $2.71 billion. It also managed to deliver strong operating cashflows with lower debt levels of $36.2 million. Super Retail Group maintained a strong and conservative balance sheet with Net debt/EBITDA below 1.5x. The company has current debt facilities of $635 million with limited debt maturities in any given year. During the year, total Segment EBITDA stood at $314.7 million, up by 7.0% on prior corresponding period.

Future Expectations: Super Retail Group expects to have a bright future due to its leading brands in the growing high-involvement lifestyle categories of Auto, Sports, Leisure and Adventure. The company will leverage this strong position with a specific focus on building brands that are as powerful as the products it sells, greater digitisation, supply chain integration and a seamless omni-retail experience. The company ensures fully franked dividend pay-outs within the policy of 55% to 65% of underlying NPAT and wants to maximise shareholders returns with a focus on financial targets.

Stock Performance: As per ASX, the stock gave a return of 43.34% on the YTD basis and a return of 2.09% in the past 30 days (as on 5 December 2019). Consistent higher returns resulted the stock price to trade close to its 52-weeks’ high level of $10.430 on 6 December 2019 ($$9.810). The market capitalisation of the company stood at $1.93 billion and is earning a dividend yield of 5.11%. In terms of valuations, the stock is trading at a P/E multiple of 13.870x.

Kathmandu Holdings Limited (ASX: KMD)

Kathmandu Holdings Limited is a retailer of equipment and clothing for the adventure and travel space.

Another Year of Record Profit: In the recently held Annual General Meeting of the company, the top management addressed its shareholders and stated that the company experienced record profits of $57.6 million, up by 13.6% in FY19 due to strong sales growth, particularly through online channels and from Oboz, and well controlled operating expenses. During the year the company generated strong cash flows which allowed for final FY19 fully imputed/franked dividend of NZ 12.0 cps and a record high full year payout of NZ 16.0 cps.

Financial Performance (Source: Company’s Report)

What to Expect: The top management of the company said that the Group trading for FY20 is in line with expectations and half result remains highly dependent on the critical Christmas trading period to come. Kathmandu Holdings Limited gross margin is in line with previous guidance for the first quarter at c.130 basis points.

Stock Performance: As per ASX, the stock of KMD delivered a return of 38.43% in the past 6 months and a return of 25.10% in 3 months (as on 5 December 2019). The consistent returns in stock resulted to stock price to trade close to its 52-weeks’ high level of $3.050 ($2.930), as on 6 December 2019. The market cap of the company stood at $854.62 million and is earning a dividend yield of 4.95%. In terms of valuation, the stock is trading at a P/E multiple of 11.89x.


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