Super Retail Group’s optimistic start to FY25
Super Retail Group (ASX:SUL), the prominent Australian omnichannel retailer, reported its annual financial results for the fiscal year 2024, reflecting strong performance that was largely pre-guided, and a positive outlook for 2025. The company, which operates four key brands – Super Cheap Auto, Rebel, BCF (Boating, Camping & Fishing), and Macpac – continues to capture a significant share of the retail market in Australia.
For FY24, Super Retail Group reported a two per cent increase in sales, despite a challenging economic environment. However, earnings before interest and taxes (EBIT) was down by nine per cent, and normalised net profit after tax (NPAT) declined by 11 per cent compared to the previous year. These results were in line with market expectations but fell short of some analysts’ predictions, mainly due to higher net interest expenses. Despite these hurdles, the company’s strong cash generation – with an 85 per cent conversion rate – was a highlight, leading to the announcement of a special dividend of $0.50 per share, following a $0.25 dividend announced at the end of FY23.
Super Retail Group’s diverse brand portfolio has helped it maintain resilience. Super Cheap Auto, originally a DIY automotive retailer, has expanded its product range significantly, catering to a broader demographic, including women. BCF has also seen growth, targeting families and broadening its range of boating, camping, and fishing equipment. In both instances, the company is successfully achieving its aim of broadening its total addressable market, and it reported 1.5 million loyalty club members.
Consistent with other retailer’s recent results, Macpac saw a notable nine per cent increase in like-for-like sales of its technical outdoor apparel and equipment over the first seven weeks of FY25, representing a strong recovery from a nine per cent decline in the previous comparable period.
A slight dip in Rebel’s performance, the company’s sporting goods division, was attributed to increased competition. However, the introduction of new product lines and a revamped loyalty program is expected to bolster its market position. The inclusion of major footwear brands like Nike and Adidas is anticipated to drive sales and enhance customer engagement.
FY25 looks promising, with early signs of strong sales momentum. The first seven weeks of the fiscal year have shown a three per cent increase in group like-for-like sales, driven by improvements across all major brands. Super Cheap Auto and BCF have reported four per cent and three per cent sales growth, respectively, while Rebel has shown a one per cent increase, highlighting a recovery in consumer spending.
Operational efficiencies and strategic shifts towards exclusive and limited distribution brands have allowed Super Retail Group to maintain gross margins of 46 per cent and above pre-COVID levels. The company has benefited from a reduced need for promotions and lower supply chain costs, including direct sourcing and reduced freight expenses. In fact, Super Retail Group expects shipping costs to remain relatively stable and certainly within tolerance levels. Meanwhile, the company has been able to extract favourable manufacturing terms, while the competitive landscape has stabilised, reducing the need for promotions. It’s worth noting Rebel’s EOFY clearance promotion started in June this year compared to July last year, meaning there were two in the one financial year. While cost of doing business (CODB) is expected to rise slightly, the rate of increase is moderating, indicating a stable cost structure moving forward.
Despite a 14 per cent increase in share price year-to-date, and a 44 per cent increase since its May lows, Super Retail Group still trades at a discount to other high-quality Australian retailers. Of course, you know what we think of such relative attractive measures.
Super Retail Group’s strong balance sheet, with a net cash position of $218 million at the end of FY24, supports ongoing capital management initiatives, including the potential for another special dividend. The solid financial footing also provides the company with the flexibility to navigate economic and operating challenges, while capitalising on growth opportunities.
Super Retail Group is focusing on expanding its customer base, improving operational efficiencies, and leveraging its enviable brand loyalty. We will closely watch the company’s performance as it executes its growth strategy this year.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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