It was something of a relief rally in the shares of Super Retail Group (SUL) yesterday as the company reported a fall in earnings and took restructuring costs in Australia designed to put some pep into sales and earnings growth.
The shares jumped more than 9% to end at $9.71 yesterday, despite the 45.5% slump in bottom line profit to $33.6 million in the six months to December.
That was after the retailer took a net $27 million in costs from the revamping of the Ray’s Outdoor chain and the decision to close the FCO chain of fishing and boating stores in New Zealand.
Underlying net profit for the 6 months to December 27 fell 4.8% to $58.1 million thanks to weaker earnings from its leisure division offset weak earnings growth in auto accessories and sporting goods.
For that reason, it’s why the company left its interim dividend unchanged at 18.5c a share.
The steady dividend was supported by a forecast from long time CEO Peter Birtles of a stronger second-half after a rise in same-store sales across all three divisions in the last few weeks.
SUL 2Y – Relief rally in Super Cheap shares
“Like for like sales growth has been circa 3.5 per cent in the auto division, circa 6.5 per cent in the Leisure Division and circa 9 per cent in the sports division for the first seven weeks of the second half,” he said.
“We will be focusing on lifting gross margin but we need to be careful to manage the trade off with sales momentum in an environment in which customer confidence is still patchy. Our ability to manage this trade off will be critical in generating EBITDA margin outcomes,” he added.
The company has already signalled revenue and earnings were under pressure from weak consumer confidence and problems in the leisure business and across the Tasman.
Group sales rose 5.7% to $1.158 billion, but group earnings before interest, tax, depreciation and amortisation before restructuring costs slipped 1% to $124 million as rising costs ate into steady gross margins.
First half earnings at Super Cheap Auto, the group’s largest and most profitable division, rose 1.7% to $55.4 million, while EBITDA at Rebel Sport and Amart was up 4.6% to $48.3 million. Earnings in the leisure division (which includes Ray’s Outdoors, BCF – Boating Camping and Fishing – and FCO in New Zealand), fell nearly 7% to $29 million, before the one-off restructuring and closure costs.
The company says it plans to spend $90 million this year (versus $105 million in 2014) on new stores and refurbishments, distribution centres and e-commerce.
