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Super Retail (ASX:SUL) share price surges 11% on FY20 update

The Super Retail (ASX: SUL) share price has surged 11% higher after giving an update about its FY20 expectations.

Super Retail is a retail business which operates several divisions including Supercheap Auto, Rebel, BCF and Macpac.

Super Retail’s strong year

Super Retail has announced that its sales were stronger than expected in the second half of FY20.

The company reported its numbers for the 52 weeks to 27 June 2020:

Supercheap Auto reported that total sales grew 7.6% with like for like (LFL) sales growth of 6.3%.

Rebel sales grew by 3.3% with LFL sales growth of 2.7%.

BCF sales grew by 4% with LFL sales growth of 3%.

Macpac total sales declined by 5% with LFL sales declining by 9.1%.

In total across the company, total sales are expected to be 4.2% higher with LFL sales growth of 3.6%.

After COVID-19 restrictions eased there was a strong rebound of sales in the fourth quarter for personal fitness and outdoor leisure activities. That was after a 26.2% decline in monthly LFL sales during the peak of the COVID-19 lockdowns. Monthly like for like sales rose by 26.5% in May and 27.7% in June.

Profit numbers

The retailer hasn’t completed its annual accounts yet, but it was able to provide preliminary unaudited management account numbers.

Total revenue is going to be approximately $2.82 billion.

‘Pro forma segment EBITDA’ (click here to learn what EBITDA means) is expected to be between $327 million to $328 million, up from $315 million last year.

‘Pro forma segment EBIT’ is expected to be between $235 million to $236 million, up from $228 million.

‘Pro forma normalised net profit after tax’ is expected to be between $153 million to $154 million (FY19’s profit was $153 million).

These pro forma numbers exclude “abnormal” items of approximately $54 million relating to remediation of wage underpayments, the exit of non-core businesses, support office restructure costs, accelerated write down of certain assets and close out of interest swaps.

However, the $54 million figure is actually below the previous guidance of $58 million for abnormal items – so this has improved. Pro forma also excludes AASB 16 lease accounting to enable a meaningful comparison with last year.

Super Retail CEO and Managing Director Anthony Heraghty said: “Given the volatile trading environment, we are very pleased with these results. The group’s omni-retail channel business strategy has enabled our businesses to adapt quickly to changing consumer behaviour during COVID-19 and delivered a resilient trading performance.”

Summary

This was clearly a strong result from the retailer considering we’re going through the worst pandemic in a century and one of the worst recessions in a century.

However, I’m not sure how much of the growth this year was simply due to the government stimulus – perhaps FY21 will be a tougher year. I’m not sure if it’s worth buying today due to that uncertainty after a strong year. I can think of some ASX growth shares and ASX dividend shares I would prefer to buy for my portfolio like Bubs (ASX: BUB).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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