Shares in Super Retail Group (SUL) hit a two month high yesterday with a trading update at the annual meeting that was on the whole upbeat. But there was confirmation the company is at least aiming to match the 2014-15 profit margins (before write-offs).
Shareholders were told that in the 16 weeks to 18 October 2014, like for like sales growth across the Group’s three divisions had improved – even the 2014-15 laggard, Leisure, where the company continues to battle tougher conditions.
The company didn’t provide an overall group sales figure (which was up around 4% in 2014-15), but said the Super Cheap car business had seen a 5% rise in topline sales, and a 3% rise in like for like (same store) sales. In the Leisure business topline sales were up 6% and same store sales were ahead a reasonable 5%, while in the sports store business, sales were up 7% and same store sales were ahead a solid 5%.
That compares to the 2014-15 performance which saw Automotive experience a 4.4% rise in topline sales and a 2.2% jump in same store sales; Leisure saw a 2.4% rise in sales, but an 0.6% fall in same store sales, and Sports saw an 8.6% jump in topline sales and a 6.6% rise in same store sales.
The shares rose more than 4.3% to $9.39, which was a stronger performance than the wider market.
In a statement before the AGM started, Peter Birtles, Super Retail Group’s CEO said, “Overall sales performance so far this year has been in line with expectations. We are pleased with the sales growth being delivered in both the Auto and Sports divisions.
"As forecast, the Leisure division continues to be impacted by new store cannibalisation and weak trading conditions in mining and regional areas – this impact is expected to reduce in the second half of the financial year. Sales at the Ray’s Outdoors and FCO businesses have been below expectations and a review of both businesses is underway.
“We continue to grow our network of stores across the Group. We expect to open around 10 new stores in the Auto division and refurbish up to 45 stores during the financial year. In the Leisure division, we expect to open four new stores, close two stores and refurbish three BCF superstores. In the Sports division, we expect to open 14 new stores (mostly Amart Sports), close five stores and refurbish 15 stores.
“Gross margins are tracking below prior comparative period for the year to date but are expected to be in line with the prior period over the full year. Full year EBITDA margin is expected to be in line with the prior year (after excluding prior year one-off tax and revenue adjustment benefits),” Mr Birtles said.
SUL 1Y – Super Cheap upbeat after sales growth
Super Cheap saw a sharp fall in earnings in 2014-15 to $81.1 million from $108.4 million the year before as the company battled weak sales and margins in the Leisure division which was extensively restructured.
Yesterday’s update is confirmation that the company will spend much of the financial year regrouping and rebuilding profit margins.
“Depreciation costs are tracking in line with a 20% increase for the full year over the prior corresponding period due to the impact of the investment the Group has made over the last three years in information technology and distribution centres to build the capabilities required to be a customer centric multi-channel retailer,“ Mr Birtles said.
"The Rays Outdoors business has been rebranded as Rays and the trial of a new store format is on track. The Rothwell store has been refurbished and new stores have opened in Bundaberg and Darwin while work on refurbishing the Fountain Gate and Nunawading stores is expected to be completed in the next two weeks.
“The integration of the Workout World and Infinite Retail businesses into the Sports Division is progressing with both businesses expected to be fully integrated by Christmas. There will be a small trading loss incurred in these two businesses prior to full integration.
“Our store development and refurbishment program will be the major component of our capital expenditure plans for the year which are expected to be around $100 million. Our supply chain development program is progressing in line with plan,” he said.
Directors said 2015-16 will be a 53 week year, therefore sales will be boosted by an extra $40 million and debt will be $70 million higher, but there will be an “insignificant” impact on earnings before interest and tax.
