LEISURE A DRAG FOR SUPER RETAIL

Written on the 21 February 2014

LEISURE A DRAG FOR SUPER RETAIL

SUPER Retail Group’s (ASX:SUL) Leisure Division is causing headaches for managing director Peter Birtles (pictured).

The mining slowdown is affecting turnover in the regional BCF warehouses and new stores are cannibalising sales at existing stores.

Leisure sales in the half year to December 28 increased 8.1 per cent to $306.9 million, reflecting the opening of 10 new stores in the period, but EBIT fell 8.3 per cent to $24.4 million, like for like sales growth was 1.6 per cent, while gross margins were down 1.4 per cent.

The division was a drag on what was otherwise a good result, with the auto and sports divisions producing strong sales.

Auto retailing sales increased by 3.7 per cent to $415 million for the half year, with 2.3 per cent like for like sales growth. EBIT grew by 9.5 per cent to $44.9 million, an increase of 0.6 per cent.

The Sports Division achieved sales of $370.2 million, with like for like sales up 5.5 per cent and EBIT grew by 5.5 per cent to $38.4 million.

Overall SUL achieved a 1.7 per cent increase in net profit after tax to $61.6 million for the half year to December 28 and EBIT was up 1.3 per cent to $101.1 million.

Birtles says the results are in line with projections.

“We recognised that many of the factors that dampened our overall result in this period were within our control. We are confident we can address these challenges and return the group to the level of operating profit improvement we have delivered consistently over the last eight years,” says Birtles.

“Cash generation across the group continues to be strong with our Leisure Division delivering improvements in working capital efficiency. We have again been able to fully fund our capital expenditure program from operating cash flow and reduce our net debt.

“We continue to make good progress in developing our multi-channel capabilities. Although changes to our systems caused some short-term disruption, we now have common infrastructure in place across the group which will facilitate supply chain and sourcing opportunities for all of our businesses.”

The new Sydney distribution centre was completed by Christmas, but there are delays in construction at the Brisbane centre.

We continue to improve our on-line customer offer and experience and have seen very high percentage sales growth in this channel.

Birtles says the second half started well for the group, with solid sales growth and a focus on lifting gross margin.

“Like for like sales growth has been circa 2.5% in the Auto division, circa 2.0% in the Leisure division and circa 6.0% in the Sports division for the first seven weeks of the second half,” Birtles says.

“We expect to deliver improvements in full year EBIT margin in our Auto Division and to maintain full year operating EBIT margin in our Leisure and Sports Divisions.”

“We also plan to continue to grow and strengthen our store network, opening two Leisure stores and opening four and closing one Sports stores during the second half.”

A fully franked dividend of 18.5 cents per share will be paid, up 9 per cent over the previous corresponding period.

SUL is trading up 1.15 per cent at $11.430 per share.


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