Is Super Retail Group now super cheap?


Australia | 10:00 AM

Super Retail Group’s first-half results sparked strong selling pressure, but analysts widely agree the results had more upside than meets the eye.

-Super Retail Group’s first-half profit of $182.8 million fell -2% from market consensus
-The company faced an uphill battle against FY21 results given the exclusion of Boxing Day in the first half
-Overall, analysts have become more positive in contrast to strong selling pressure on the day of release

By Danielle Austin

Super Retail Group ((SUL))’s first-half results appear to have disappointed the market, with the earnings release triggering a -9.5% share price decline on the day of the release. The company reported first-half revenue of $1.71 billion and profit of $182.8 million, which was below consensus guidance of $186.8 million.

Compared to the prior comparable period, the company recorded declines in sales, earnings and earnings of -4%, -33% and -36%, but considering the reference period for the six months ended December 25 , the generally strong retail period after Christmas, including Boxing Day sales were not reflected in the first half results unlike the previous year.

Analysts suggest including Boxing Day sales in first-half results could have added a $27 million profit on revenue and pushed earnings up half $7 million to beat consensus forecast of $189.8 million. Additionally, the inclusion of Boxing Day in the first half of the prior year created a tough comparable result, but can now offer upside expectations for the second half.

Investors and traders were also likely spooked by the gross margin squeeze during the six months which saw margins fall -100 basis points yoy to 46.7%, but current margin levels suggest that increases achieved over the past two years have been retained while margins remain up on pre-covid levels, and 170 basis points higher than in the first quarter of fiscal 2020.

The company reported a -5.9% like-for-like sales decline in the first half, but FY21 results were difficult to compare to the end of the cycle and like-for-like sales were up 15, 4% from FY20 results.

Exposure dictates results early in second half

Super Retail Group is the global banner for Supercheap Auto, Rebel Sport, BCF and Macpac retail stores. The company has already shown some rebound at the start of the second half, with like-for-like group sales up 6.0% in the first six weeks of the period.

On a brand-by-brand basis, increased exposure to Rebel Sports malls led to a -2.4% drop in like-for-like sales in the first six weeks of the second half as rising covid cases drive foot traffic moderate.

Supercheap Auto and BCF, two brands less exposed to shopping malls, fared much better with positive like-for-like sales growth of 9.3% and 12.2% respectively. Along with better exposure to foot traffic, both brands likely benefited from higher inventory positions for key categories. The continued decline in covid cases should lead to an increase in foot traffic in the second half, analysts suggest, to the benefit of the Rebel Sport brand.

Online sales also rose 64% in the first half, contributing $389 million in sales, suggesting a change in consumer behaviors. This growth included a 109% increase in click and collect sales.

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