Super Retail Group (ASX: SUL) has just released a trading update, is the share price a buy?
Super Retail Group is a retail conglomerate that traces its history back to the 1970s, it’s now one of the biggest in the country. It operates a number of recognisable retail brands including BCF Boating Camping Fishing, Macpac, Rebel, and Supercheap Auto. It’s headquartered in Brisbane and has over 12,000 employees in Australia, New Zealand and China.
Super Retail’s Trading Update
The retail business is holding its annual general meeting (AGM) today and provided a trading update.
For the first 16 weeks of FY20 the company has delivered total sales growth of 4.2% and like for like (LFL) sales growth of 3.2%.
Helpfully, the company broke down the performance of its individual businesses.
Supercheap Auto had total sales growth of 3.5% and LFL sales growth of 2.7%.
Rebel had total sales growth of 3.9% and LFL sales growth of 3.1%.
BCF had total sales growth of 6.7% with LFL sales growth of 6.5%.
Macpac had total sales growth of 3.8% with a LFL sales decline of 2.1%.
Apparently the boating, camping and fishing sector is booming at the moment!
Super Retail explained that Macpac was competing against a strong sales performance in the previous corresponding period, with Macpac also refining its promotional and pricing strategy as management try to strike the balance between sales and margin.
Anthony Heraghty, Managing Director and CEO of Super Retail, said: “We have made a solid start to the year. 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.”
It’s no surprise that the Super Retail share price is down around 4% in early trading. Retail is run on relatively low profit margins to start with, so a profit margin reduction isn’t good news, although sales growth partially helps to offset that.
Super Retail has a relatively low price/earnings (PE) ratio and a solid dividend yield.
Retail is a really tough industry. It’s definitely possible to make money from it, but it’s not what I want to invest in for my own portfolio because of the high levels of competition.
I’d rather buy the reliable shares in the free report below instead.
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