Super Retail Group (SUL)
BUY

Strong sales outlook

 18 Aug 2022
Sector: Consumer Discretionary

Need to know:

  • Strong earnings beat driven by stronger sales trends through 2H22
  • Costs pressures and elevated inventory weigh on an overall positive result
  • FY23 outlook positive. Segment sales for first 6 weeks of FY23 suggest acceleration vs 2H22

Investment implications

FY22 Result: Group EBIT +9% vs market. EPS and DPS +8% vs market.  FY23 first 6-weeks of trading strong +17% yoy group sales growth. Higher operating costs are expected to make an impact in 2H23. Inventory levels remain elevated, having grown ahead of sales. A robust result, with small earnings upgrades likely from the Market.

Result Details: EBIT A$397m vs A$358m mkt. Net profit A$244m vs A$224m market. EPS 1.09cps vs 0.98cps mkt. DPS 0.70cps vs 0.65cps market. Operating cash flow A$340m vs A$368m market.

Outlook: Segment sales up for first 6 weeks: Supercheap (+16%), Rebel (+13%), BCF (+17%), Macpac (+42%). Normalised sales +6% yoy. This suggests an acceleration vs 2H22 trend.

Inventory: levels remain elevated, however management reiterated that this is due to avoiding supply chain risk (4 weeks of safety stock) and that they’ll bring it down in FY23 once conditions normalise.

Summary: A strong result that continues to suggest the operating environment remains largely unchanged following interest rate rises. SUL has performed strongly since interest rate fears peaked in late June, lifting the FY23E PER from 9x to 12x, which is now just below the 13x PER SUL has averaged since 2019. Well run business, but the share price approaching fair value in our view.

FIGURE 1: SUL GROUP SALES

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Stock overview

Share Price

Company overview

Super Retail Group encompasses the Supercheap Auto, Rebel, BCF, and Macpac retail brands.

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