Margins Squeezed But Super Retail Navigates “Cautious Consumer”

By Glenn Dyer | More Articles by Glenn Dyer

Another big retailer has not mentioned any impact on its September quarter sales from the federal government’s much-touted tax refunds in a trading update yesterday for the start of the 2019-20 financial year.

Shareholders in Super Retail Group (which owns Rebel, Super Cheap Auto, BCF and Macpac) were told on Tuesday that while the company has a solid rise in sales for the first few months of this financial year, trading was tough and profit margins were being crimped.

The meeting was told that like-for-like sales were up 3.2% for the first 16 weeks of the 2020 financial year.

However, the company attributed the growth to increased marketing and promotional activity, a sign retailers are still not seeing any benefits from the Morrison government’s tax refunds (totalling nearly $8 billion)

Super Retail CEO Anthony Heraghty said it was a solid start to the financial year, but noted retail conditions in Australia were still rocky, leading the company to rely on more promotional activity.

“While retail consumer sentiment remains mixed, the group has delivered strong sales growth and like for like sales growth across our three largest brands,” he said.

“In response to a cautious consumer, we have activated a higher level of promotional activity across the business which has successfully generated top-line growth but adversely impacted margin.”

The company’s shares sold off after hearing that news and they ended the day down 8.6% at $8.74 as investors saw lower profits for the six months to December as a possibility despite the higher sales.

Of the company’s chains, outdoor retailer BCF has seen the best sales growth, with like-for-like sales up 6.5%. Recently acquired NZ-based hiking and outdoor leisure business Macpac was the only brand to experience a drop in sales, with like-for-like sales down 2.1% because the chain is coming off strong sales growth a year earlier.

We remain confident that Macpac will continue to deliver shareholder value as we open stores, grow digital sales and increase our brand awareness in the Australian market,” Mr. Heraghty told the meeting.

Speaking more broadly about the results, Mr. Heraghty said it was a solid start to the financial year, but noted retail conditions in Australia were still rocky, leading the company to rely on more promotional activity.

“While retail consumer sentiment remains mixed, the group has delivered strong sales growth and like for like sales growth across our three largest brands,” he said.

“As always, the Group’s first-half result will be highly dependent on the Christmas trading period,” he added.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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