Super Retail Group (ASX:SUL) just reached an All-time-high following its latest trading update

Super Retail Group (ASX: SUL) just reached an all time high after releasing unaudited results for the first half of FY23 (1HY23). The company told investors it had hit a new ‘record’ in sales, raking in about $2.02 billion. That sounds huge, but is it really?

Balancing Rising Costs and Shifting Profits

When you compare this figure to last year’s $1.96 billion, the jump isn’t as big as you’d think. The reason? Prices went up, which is pretty much the story of today’s economy.

The group’s popular brands – Super Cheap, Rebel, Macpac, and BCF – saw a 4% boost in sales. 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.

Super Retail is bracing for a pre-tax profit in the range of $200 to $203 million, a step down from last year’s $218 million. The CEO, Anthony Heraghty, gave a nod to the strong showings during peak sales periods, but he didn’t gloss over the hurdles they faced in the second quarter, particularly in retail.

Now, here’s the crunch: their costs of doing business are climbing – we’re talking higher wages, rent, and electricity bills, all pumped up by inflation. This is especially tough on their Rebel brand.

Investing in Customer Engagement with a Deferred Payoff

Rebel’s new customer loyalty program, launched in October 2023, is showing positive signs. It’s already popular, with over 40% of active club members earning points through their purchases. However, this initiative has required setting aside about $8 million for deferred revenue in the first half of the financial year 2024, impacting Super Retail’s financials. This strategy, aiming to improve customer engagement and loyalty, reflects a thoughtful move by Super Retail, even if it means some short-term financial adjustments.

Super Retail Group is sitting pretty financially – no bank debt and a healthy cash balance, just like at the end of the last fiscal year.

Super Retail Group’s update was Investor-Approved

After the company shared its latest trading update, their shares soared to a new 52-week high. This jump in share price is a big thumbs up from investors, showing they believe the company has a bright future ahead.

Analysts in the ASX retail space, headed by Goldman Sachs, are giving Super Retail a thumbs up. They’re impressed with the company’s strong holiday sales and growing profits. Super Retail’s mix of different brands and smart strategies seems to be a winning formula in the tough world of retail. Sure, a few analysts are playing it safe with a more cautious view, but generally, the mood is upbeat about where Super Retail is heading.

Anticipated Performance and Direction

As Super Retail gears up to unveil its final audited results, all eyes are on how each of its brands has fared in the first half. The spotlight is on their tactics for handling rising costs while still appealing to shoppers watching their wallets. Rebel Sport, in particular, is getting extra attention due to its slight sales dip and the roll-out of its new loyalty program. Plus, there’s keen interest in how the company plans to keep profits up amid these cost challenges, especially with their move to open a new automated distribution centre. It’s a strategic play that could be a game-changer in keeping them competitive in the market.

Addressing Inflation and Cost Challenges

Super Retail, especially its Rebel division, is feeling the heat from rising business costs. Heraghty is focusing on the silver lining, highlighting the group’s strong sales growth in the first half, even in a tight retail market squeezed by consumer cost-of-living woes. The company’s knack for offering great value and nailing its promotions during busy shopping seasons has paid off, turning these tough times into solid earnings.

Can they deal with Uncertain Times?

In the first half of the financial year 2024, Super Retail Group’s performance has been a bright spot in tough economic times. Despite inflation throwing a few curveballs, the company’s varied brand lineup, upbeat sales growth, and savvy handling of costs suggest good things on the horizon. It’s like they’re navigating a tricky obstacle course with skill, keeping their eyes on the prize of a promising future.

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