The Super Retail Group Ltd (ASX: SUL) share price could rise today after a FY21 half year profit update.
Super Retail is the business behind retail brands like Supercheap Auto, Macpac, Rebel and BCF.
HY21 profit update
The company said that it generated a record result which was driven by unprecedent consumer demand throughout the period.
Super Retail achieved total sales growth of 23% with like for like sales growth of 24%. Total online sales grew by 87% to $237 million. Online sales represented 13% of total sales, with click and collect sales rising 74% to $108 million, representing 45% of total online sales.
Whilst online sales growth was strong across all companies, there was a varied performance in total sales terms. Supercheap sales went up 20%, Rebel sales grew 15% and BCF sales grew 51%, but Macpac sales dropped 5% (and like for like sales fell 3%).
Profit measures
Super Retail’s gross profit improved by 270 basis points (2.7%), which supported higher EBIT (EBIT explained) margins across all four core brands.
Provisional segment EBIT (before AASB 16 accounting changes) is expected to be in a range of $253 million to $256 million, between 119% to 122% higher than the prior corresponding period.
Provisional normalised net profit after tax (NPAT) is expected to be in a range of $170 million to $173 million, which would represent an increase of 196% to 201% higher than HY20.
In divisional terms, Supercheap Auto and Rebel are each expected to make around $100 million of EBIT, BCF is expected to make just over $60 million of EBIT and Macpac is expected to make $3 million of EBIT. There’s also $13 million of unallocated divisional EBIT costs.
The result excludes $1.7 million received in jobkeeper wage support which will be returned to the Australian government.
Management comments
Super Retail CEO and Managing Director Anthony Heraghty said: “Since our last update to the market in October, the group has continued to perform well. We are particularly pleased with our record online sales over the November cyber weekend and strong Christmas trading. This has culminated in a record first half performance for the group.
“The operating leverage which the group has been able to achieve during a period of robust online sales growth clearly reinforces the profitability of our digital sales and, in particular, the scalability of our omni retail platform.”
Summary thoughts
The company is expecting inventory levels to normalise during the second half, as well as higher levels of promotional activity, so that may mean the profit margin may be more ‘normal’ in the second half as well.
This was a great result from Super Retail. But, just like other retail shares, I’m just not sure how long this extraordinary growth rate can continue, particularly as jobkeeper has really slowed down.
There are some ASX growth shares in the retail space that I’d rather invest in such as City Chic Collective Ltd (ASX: CCX) due to the global growth element.
