Sport and leisure drag on Super Retail Group’s first quarter
In a trading update coinciding with its annual general meeting yesterday, Super Retail Group CEO Peter Birtles told investors that trading through the 16 weeks ended 21 October (Q1) had been in line with expectations, despite being dampened by a “subdued consumer environment”.
Demand for tools and solid auto categories drove Supercheap Auto’s total sales up six per cent in Q118, with like-for-like (LFL) growth of 4 per cent.
The sports division, which is currently undertaking a merger of Amart Sports into Rebel, saw total sales grow by 5 per cent and LFL sales increase by two per cent.
Leisure brand BCF recorded a 5 per cent increase in total sales and 2 per cent growth in LFLs, while no specific trading information was provided for troubled outdoor brand Rays.
“We have made a positive start to the year with the businesses delivering profitable growth in line with our budget expectations.
“Although like for like sales growth has been slightly dampened by the subdued consumer environment, we continue to generate sourcing and supply chain efficiencies and are maintaining strong operating cost control across the Group,” Birtles said.
A Super Retail Group spokesperson said Rays was omitted from the Q1 trading update due to disruption associated with a turnaround of the business, however Birtles did say its new store format has “shown some promising signs”.
Birtles flagged a decision on the future of Rays by Q318, after having told the market that a decision would eventually be made on whether to divest from the business in August.
Rays booked an EBIT loss of $6 million in FY17, underpinned by a 1.4 per cent decline in LFL sales, and is forecasted to lose a further $4 million in FY18.
BCF on the other hand had a more promising start to the year, despite difficult trading conditions, with a new brand campaign and revised pricing/promotional strategies bolstering its performance.
Management plans to open a net two BCF stores in FY18 and open one Rays store.
Within the sport division the merger of Amart Sports into Rebel will be completed by 28 October, with 63 of the 68 Amart locations having already been rebadged to Rebel, with a further three Rebel stores planned for FY18.
“Sales performance has been solid in the sports division during a period in which the sports team has been focused on merging the Amart Sports business under the Rebel brand,” Birtles said.
“Customer and team members have responded enthusiastically to the changes and we expect to build stronger engagement as further changes to range and store liveries are completed over the balance of the year.”
In auto, Supercheap Auto has continued its dominance over the auto-retail market in Q1, a more ambitious store expansion plan that will see net nine stores opened in FY18 and 44 refurbished with learnings from its recently opened Penrith concept.
Further addressing the 22.75 per cent decline in the Group’s share price since the start of January, Birtles said the Australian retail environment is experiencing rapid changes, but that the need to keep up was recognised by management.
“The retail environment in Australia continues to see rapid changes, with the arrival of international retailers both online and bricks and mortar, changing consumer expectations and behaviours, digitalisation and new technologies,” he said.
“The concern over new competitors entering the retail market has dampened our share price performance in recent months but our ten-year total shareholder return continues to track strongly ahead of the ASX 200 index.
“We have been anticipating increased competition for some time and our strategy continues with a clear focus on our customer and we continue to invest in improving our capabilities to deliver for our customers and team members.
“We recognise the need to continue to evolve our businesses to position them to be able to compete and perform in the changing retail environment,” Birtles continued.
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