Super Retail Group (ASX:SUL): The latest chapter in a turbulent 3-year ride for investors

Back in February 2024, Super Retail (ASX: SUL) reached an all time high  after declaring it had new ‘record’ in sales, raking in about $2.02bn in 1H24. A lot has gone on since then including a ‘confession’ during confession season and the ‘messy’ departure of its CEO, but the company’s shares are only down 6% in the last year and would be in positive territory but for the CEO’s departure.

How is this company really going?

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Super Retail appeared to be thriving but not when you ‘dig deeper’

We last wrote about this company in mid-2024 when it had declared in February it achieved record sales, only to issue a poor trading update amidst confession season just a few months later.

To state the obvious, even though Super Retail’s performance was a record, the jump in sales wasn’t that big – it was $1.96 billion just 12 months prior. And even though some brands (which include Super Cheap, Rebel, Macpac, and BCF) saw sales growth of up to 4%, this included acquisitions and new store openings.

When we look at like-for-like sales (not accounting for new store openings), which really show us how things are going, they only grew by 1%. This small bump suggests that people are feeling the squeeze from rising living costs and are being more careful with their spending. At the same time, they tell that new store openings are not a sunk cost.

Even then Super Retail told investors to brace for a pre-tax profit in the range of $200 to $203 million, a step down from prior year’s $218 million. Then CEO, Anthony Heraghty, couldn’t shy away from the fact that their costs of doing business are climbing – we’re talking higher wages, rent, and electricity bills, all pumped up by inflation.

More problems

In April, a couple of ex-employees sued the company for loss and damage of A$30-50m for allegations, including bullying, unreasonable workloads and insufficient volumes. The employees were also concerned about Heraghty allegedly being in a secret relationship with the former head of HR. What’s the big deal about this office romance specifically? Well the pair argued it ensured all of the above to go on in that those concerns were ignored – at least, that is what the ex-employees are alleging.

Super Retail entered mediation and hired a law firm to investigate the claims but found they were unsubstantiated. But the two ex-employees wouldn’t take no for an answer and launched a court action which is scheduled to be heard in the new year. The plaintiffs want $30-50m in damages.

But let’s get back to mid-2024. In May, the Macquarie Equities Conference came and the company told investors group sales were down 1% so far in 2H24. BCF led the decline with a 5% drop. Although total sales growth across the group was up 2% overall, it was flat on a like-for-like basis.

‘Given current challenges around inflation and interest rates, our customers are managing their spending carefully and becoming increasingly value-focused,’ declared Heraghty.

‘While store foot traffic and transaction volumes continue to grow, ongoing cost of living pressure is impacting [the] number of items per sale’.

Super Retail has continued to be volatile each reporting season. Ultimately for FY24, it delivered full year sales of $3.9bn (up 3%) and a statutory profit of $240m (down 9%). It could not even hide a decline in EBITDA and EBIT which were down 4% and 9% respectively. Supercheap Auto was the best performer in the sense it saw consistent like for like growth across the year while Rebel was down, Macpac was flat and BCF was up and down throughout the year but ultimately 5% higher. Online sales as a % of total sales was 13%.

FY25 was…better

Super Retail revealed sales had been strong in the first 7 weeks of FY25 with sales up 5% overall and up 15% at Macpac. An October trading update also showed growth with 4% overall and 10% at Macpac. Statutory results for the 1st half of FY25 showed 4% sales growth overall, 1.8% like-for-like sales growth, and a profit of $129.8m on a statutory basis and $130.8m on an underlying basis. Investors re-acted poorly to it.

But its presentation to the Macquarie Conference did not lead to a drop given the trading update it gave then was positive, showing better growth in like for like sales given the stronger Easter period.

Super Retail’s full year results showed 4.5% sales growth overall and 2.6% like for like growth with the ‘worst’ being Supercheap Auto which grew 0.3% like for like while BCF was the best, up 5.4%. Its statutory profit was down 8% to $222m and its underlying profit was down 4% to $232m.

Investors were told sales grew 3.1% like for like and 5% overall in the first 7 weeks of FY26, but did not give guidance except that it planned to open 23 new stores and close 9 stores. They also saw their company become one of several to criticise Victoria for the difficulty of doing business for a variety of reasons, most particularly high crime.

But results are just one thing investors are watching.

Anthony Heraghty departs

Earlier this week, Super Retail showed CEO Anthony Heraghty the door. CFO David Burns is interim boss while a permanent replacement is searched for.

As noted, he had a relationship with the company’s former HR head Jane Kelly and while the relationship was not new, he had not given sufficient disclosures to the board earlier. Obviously office relationships are complicated at the best of times but what happened with Andy Byron has made it even more so.

But whilst Heraghty and Lowe were never caught at a Coldplay concert, remember that the plaintiffs allege their relationship ensured all the alleged misconduct went on.

In one sense the board wanted to save face and show that it acted…but it remains to be seen if it was ‘fast enough’ in the sense that it could help the company escape liability.

So where to now?

Well, the company has to get this case behind it somehow, whether by a settlement or fighting it in court. It also needs to find a new CEO, and we suspect a board overhaul would do it no harm.

But put all these dramas to aside and just look at its results. Should you view this as a ‘buy the dip’ opportunity? In short, no. We think there are better opportunities in the ASX Retail space, in the form of companies with genuine underlying sales growth.