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Profit falls as Super Retail Group delivers record sales

Despite a strong second-half performance boosted by online sales increasing by 44 per cent, Super Retail Group (ASX: SUL), the parent company of retailers Supercheap Auto, Macpac, BCF and Rebel, has posted a 20 per cent fall in net profit to $244.1 million for FY22.

The Brisbane-headquartered company’s first half of the year was impacted by COVID-19 lockdowns, which reduced in-store revenues. However, second-half sales grew strongly as foot traffic recovered.

The group recouped to record total sales of $3.55 billion across FY22, buoyed by online sales of $601 million, as it executed a successful omni-retail strategy alongside a proactive supply chain management to negate widespread global disruption.

“Record online sales and the group’s strategic decision to invest in inventory in response to a disrupted global supply chain underpinned our first-half performance,” says Super Retail Group CEO Anthony Heraghty.

“Our solid inventory levels enabled us to capture consumer demand when retail spending rebounded in the second quarter following the end of COVID-19 lockdowns.

“The group delivered a strong second-half result, with like-for-like sales increasing by 5 per cent. This reflected a growing contribution from our successful new store formats, positive like-for-like sales across all four core brands, and a record June winter sales result for Macpac.”

Super Retail Group increased the number of active members of its loyalty program to 9.2 million, with this base representing 70 per cent of group sales. The program added one million customers to the program, a 14 per cent increase, during the year.

Sales of automotive parts and accessories retailer Supercheap Auto dropped 7.7 per cent during the first six months of the year but rebounded strongly in the latter half of the year, driven by a strong performance in lubricants, auto maintenance and tools.

The Supercheap Auto arm converted 34 of its stores to a next-gen format, which has seen a sales uplift of low-to-mid single-digits, as it delivered total sales of $1.3 billion across an adjusted 52-week period.

Sports equipment chain Rebel brought in $1.19 billion in sales across its 155 stores, supported by an increased contribution from new rCX format stores and the strong performance of basketball apparel.

Outdoor clothing arm BCF increased sales by 2.7 per cent to $797.7 million as it opened five new stores, although its gross margin dropped 300 basis points on the back of increased promotional activities and higher supply chain costs.

Macpac, the outdoor brand that Super Retail Group acquired in 2018 for $135 million, performed the strongest, increasing sales by 11.4 per cent to $153.4 million across an adjusted 52-week period.

Increased sales in Australia of 12.4 per cent against the previous year made up for a drop in sales of 6.5 per cent in New Zealand as the impact of COVID-19 reduced travel and tourism in the country.

The group is currently experiencing increased foot traffic in stores, and strong consumer demand brought about by low unemployment and high levels of household savings.

However, it expects rising interest rates and higher costs of living will start to impact consumer spending in the second half of FY23, dampening elevated levels of demand which arose during the pandemic.

The company has advised that shipping availability and port handling times are improving, and transport and logistics costs have started to moderate although they remain above historical (pre-pandemic) levels.

“The group has made a positive start to FY23 with all four core brands delivering strong like-for-like sales growth, noting, however, that the group is cycling lockdowns in the prior comparative period,” says Heraghty.

“Since 2019, the group has made excellent progress in increasing the scale and profitability of its digital offering as we continue our transformation from a traditional bricks-and-mortar retailer to an omni-retail business. Despite the challenges of the pandemic, the group has invested for future growth – including in our digital capability, store network, warehouse management systems, supply chain and workplace management systems.

“I am confident that the business improvements delivered by this investment will strengthen our competitive position and generate long-term value for our shareholders.”

The group will look to invest significantly in leveraging its first-party data over the next two years, launching new loyalty programs, developing a customer data platform, and building its customer analytics.

It plans to open 30 new stores across its four core brands in FY23, including our BCF superstore in Townsville.

Shares in Super Retail Group (ASX: SUL) have risen 4.21 per cent to $10.69 as of 10.13 AEST.

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