View on Retail Sector Sentiment - What is making Super Retail share price take a hit

  • Oct 23, 2019 AEDT
  • Team Kalkine
View on Retail Sector Sentiment - What is making Super Retail share price take a hit
Super Retail Group (ASX: SUL)

As one of the top 10 retailers of Australasia, Super Retail Group (ASX: SUL) is headquartered in Brisbane and its network spans to over 670 retail stores across Australia, New Zealand and China. Since its inception, SUL has progressed to be one of Australasia’s major retailers, housing iconic brands including Supercheap Auto, Rebel, BCF (Boating Camping Fishing), and Macpac.

The company has come up with significant announcements in recent times. Moreover, it was noted that SUL’s stock, listed on ASX, experienced fluctuations. However, SUL has reached significant operational achievements over the years.

Let’s walk through the recent updates from SUL.

Total Sales growth of 4.2% for SUL

As per the October trading report by Super Retail Group, witnessed a total sales growth of 4.2% and like for like sales growth of 3.2% over a period of first sixteen weeks of the period between 2019-20.

1 Sales Growth for SUL

Figure 1 Sales Growth for SUL (Company's Report)

Mr Anthony Heraghty, the Managing Director and CEO of Super Retail Group, believes that SUL has made a solid start to the year. He further added,

“While retail consumer sentiment remains mixed, the Group has delivered strong sales growth and like for like sales growth across our three largest brands”

“In response to a cautious consumer, we have activated a higher level of promotional activity across the business which has successfully generated top line growth but adversely impacted margin”

With the opening of new stores, increasing online sales and growing brand awareness in the Australian market, SUL anticipates continued delivery of shareholder value.

SUL’s Stock Performance

On 23 October 2019, SUL stock was trading at a price of $8.830 (at AEST 1:59 PM), up 1.03%, with a daily volume of ~870,953 and a market capitalisation of approximately $1.73 billion.

SUL’s Stock Performance

Figure 2 SUL’s Stock Performance (Company's Report)

Over a period of last six months, SUL stock has increased by 2.58% return (as on 22 October 2019).

SUL Announces Full Year Dividends 50 cents per share

Super Retail announced full year dividends of 50 cents per share fully franked, an increase of 2 per cent as compared to the prior year. Moreover, SUL Board’s decision to affirm a final dividend of 28.5 cents (fully franked) was supported by the financial performance and prudent capital management.

Dividend Per Share of SUL

Figure 3 Dividend Per Share of SUL (Source: Company's Report)

In addition to this, SUL was able to uphold the dividend payout ratio of between 55 per cent and 65 per cent of underlying net profit after tax, which was in line with SUL’s policy.

As per the company’s report, SUL has witnessed an increase from 13 cents to 50 cents in its dividends per share, which amounts to a compound annual growth rate of 11%. Moreover, the total shareholder returns provided by SUL are in surplus of the S&P/ASX 200 Index and the SP/ASX 200 Consumer Discretionary Index, over the same ten years period.

The recent financial forecast made in the light of trade wars, RBA interest rate cuts, retail consumer sentiment and the health of the Australian economy add to the uncertainty about the challenges that the future brings to the table with changing retail and economic conditions.

Succession Planning at SUL

As part of SUL’s succession planning, SUL announced in January that Anthony Heraghty would succeed Peter Birtles as Group Managing Director and Chief Executive Officer.

As an experienced and customer focused leader, Anthony focuses on the continuous evolution of the business as an omni-retailer, including reshaping the capability required for success.

Divisional Performance of SUL

Let us now talk about the performance of the divisions of SUL.

Supercheap Auto sales up by 3.4%
  • Divisional sales of $1,040.6 million were 3.4% higher than the pcp, supported by like-for-like growth of 2.3%;
  • Like-for-like sales growth of 2.3% was driven by higher ATV and reflected an increase in average item value and higher average units per transaction;
  • Gross margin was in line with the prior comparative period and operating expenses as a percentage of sales improved by 0.3%;
  • Segment EBITDA increased by 5.3% to $156.1 million and EBITDA margin of 15.0% was 0.3% higher than the prior comparative period;
  • Segment EBIT increased by 3.6% to $120.6 million, and EBIT margin of 11.6% was in line with the prior comparative period. Auto maintenance and auto accessories, which represent approximately three quarters of divisional revenue, were the strongest performing categories and delivered solid sales and LFL sales growth;
  • Growth in services such as diagnostics, blade, bulb and battery fitting supported product sales and helped deliver $8 million in total services revenue in the financial period;
  • As of June 2019, Supercheap Auto had 278 stores in Australia and 45 stores in New Zealand;
Rebel sales up by 3.8%
  • Divisional sales of $1,016.4 million were 3.8% higher than the prior comparable period, supported by like-for-like sales growth of 3.3%;
  • Segment EBIT of $93.8 million was 2.5% higher than the prior comparative period;
  • Like-for-like sales growth of 3.3% was driven by both transaction growth and higher average transaction value;
  • Gross margin was in line with the prior comparative period and operating expenses as a percentage of sales improved by 0.3%;
  • Segment EBITDA increased by 6.0% to $122.6 million and EBITDA margin of 12.1%, was 0.3% higher than the prior comparative period;
  • Segment EBIT margin was noted at 9.2%, which was 0.1% lower than the prior comparative period;
  • As at June 2019, Rebel had a network of 161 stores;
BCF sales up by 3.3%
  • Sales of $514.6 million increased by 3.3% on the prior comparative period;
  • Sales growth was primarily attributable to LFL sales growth of 3.2%, which was driven by higher average transaction value resulting from higher units per sale;
  • Segment EBITDA decreased to $40.2 million, and EBITDA margin of 7.8% was 1.1% lower than the prior comparative period;
  • Segment EBIT decreased to $20.8 million, and overall EBIT margin declined to 4.0% from 5.5% in the prior comparative period;
  • The BCF club loyalty program exhibited strong growth in the financial year with active memberships increasing by 7% to 1.47 million. BCF club members represent 81% of total BCF sales;
  • Average club member NPS increased from 57% to 61% previously;
  • Online sales grew by 6%, reflecting growth in both online traffic and online conversion. BCF was the first of four brands to re-platform, which negatively impacted online sales;
  • As at June 2019, BCF had 136 stores;
Macpac online sales up by 24%

The Macpac business, which was acquired effective 31 March 2018, made a full year contribution in FY2019, compared to a three-month contribution in FY2018. During the financial period, the Group successfully completed the integration of Macpac and ceased operating Rays.

  • The Rays brand has ceased to operate and incurred $2.4m of EBIT losses in the financial period;
  • Sales from Macpac stores (including Adventure Hubs) increased to $119.3 million supported by store openings and like-for-like growth;
  • Like-for-like sales growth for Macpac (including Adventure Hub stores from week 44) was 7.3%;
  • Macpac online sales grew by 24% during the financial period and now represent over 10% of total sales;
  • Macpac now has over 400,000 club members, representing about two-thirds of total sales;
  • As at June 2019, Macpac had 70 stores - comprising 61 small format stores and nine Adventure Hub stores;

With over six million active members (representing over 56% of SUL sales) in its loyalty club programs, SUL holds a great opportunity to develop closer customer relationships by refreshing loyalty programs coupled with insights from customer data analytics to deliver more customised and personalised offers.


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