Super Retail Group Increases Inventory Ahead Of Lockdowns Easing

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Super Retail Group Increases Inventory Ahead Of Lockdowns Easing

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  • Improved FY21 gross margins sustained in first 16 weeks of FY22
  • Loyalty program membership currently 8 million customers, targeting 10 million
  • Clear trend in higher online sales from 12 percent in FY21 to 25-25 percent in medium term
  • Consumer demand across all 4 brands expected to rebound quickly once COVID restrictions ease

Super Retail Group (‘Super Retail’ or the ‘Group‘) is one of Australia’s top 10 retailers that owns and operates a portfolio of retail brands across Australia. The brands include Supercheap Auto, outdoor and leisure retailers Macpac and BCF and sporting retailer Rebel Sport. The Group operates in Australia, New Zealand and China.

Annual General Meeting Commentary

Super Retail is presently focused on preparation for Christmas trading and positioning the Group for a nationwide reopening of domestic travel and outdoor leisure activity. This follows record financial results in FY21, during a year marked by COVID-19 trading restrictions and lockdowns, which adversely impacted store sales and supply chain logistics.

However, it is the way that Super Retail responded to the pandemic that sets the Group up for sustained sales and earnings growth into the future. In FY21 online sales accounted for 12 percent of Group sales or $416 million, including 1.5 million home delivery orders to the value of $224 million and $192 million of Click & Collect sales.

While COVID-19 turbo-charged online sales, there is an underlying long-term trend across the Group’s 4 brands toward digital sales. This is why Super Retail will continue to invest in data and analytics to hyper-personalise their customer relationships. This is being achieved through growth in active loyalty program and club membership. The Group has 8 million members now and plans to increase this number to more than 10 million. Active club members currently account for 63 percent of total sales, representing a solid bedrock for the business. The Group firmly believes that online sales will continue to increase in the medium-term to the 20-25 percent levels seen in international markets.   

Today the Group has no bank debt, and inventory levels are already elevated to counter any supply chain issues that may arise in the lead up to Christmas trading.

Year-to-date Trading Performance

COVID-19 lockdowns in the key markets of NSW, Victoria, ACT and New Zealand have severely impacted trade to a greater extent than in the previous corresponding 16 week period. Excluding the major impacted markets of NSW and Victoria, Group like-for-like sales are down 6 percent compared to FY21. 

Not surprisingly during this period online sales have grown significantly to represent 30 percent of Group sales, year-to-date. This explains why improved gross margins that were achieved in FY21 have been sustained in the first 16 weeks of FY22. However, higher freight and logistic costs associated with the elevated levels of inventory could impact future gross margins as supply chain conditions remain uncertain and challenging.

To date, Group trading conditions are steady in non-COVID impacted regions. Super Retail are confident that a rapid sales rebound will occur as lockdown restrictions end. The Group has maintained elevated inventory levels in anticipation of an uplift in consumer demand over the summer holiday period.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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