Super Retail Group sales weighed down by fire and drought

20 January 2020, Written by Business News Australia

Super Retail Group sales weighed down by fire and drought

Fire and drought impacts have combined with higher labour costs brought about by an enterprise agreement to weigh down on Super Retail Group's profit forecast.

Bushfire smoke haze has led like-for-like (LFL) sales growth to go backwards at Super Retail Group's (ASX: SUL) outdoor-focused stores BCF and Macpac, especially for camping and hiking products.

The group reports more than 50 BCF stores have been directly impacted by fire or drought, including the temporary closure of some stores in December due to bushfires along with disrupted trading hours. 

"After a strong start to our peak trade season with higher year-on-year trading across the Black Friday and Cyber Monday online events, the bushfires and sustained drought conditions have impacted December trading," says group managing director and CEO Anthony Heraghty.

"Whilst we expect the impact to be one-off, it is difficult to estimate how long it will take for sales to recover, specifically in the outdoor category."

Like-for-like sales declined by 0.5 per cent for BCF in the half, although stores that were not impacted by fire or drought delivered 3 per cent growth, pushing the overall growth rate into positive territory at 0.8 per cent.

The same cannot be said for Macpac, where like-for-like sales were down 7 per cent for the half and 9.5 per cent in December, with NSW and Victoria "heavily impacted".

Macpac Adventure Hub stores, which have a more extensive camping and hiking offering, experienced a more substantial LFL sales decline.

The group notes Supercheap Auto's sales were also impacted, particularly in regional stores in NSW, Victoria and Queensland. Meanwhile, Rebel saw a slowing of sales momentum in NSW post week 16.

However, same-store growth was still in positive territory for Supercheap Auto and Rebel for the half, at 2.4 per cent and 3.3 per cent respectively. This helped to offset problems at the outdoors-oriented chains and lifted group sales up 2.9 per cent.

SUL's provisional first half revenue is projected to be $1.44 billion with EBIT in the range of $113-115 million. This compares to an EBIT of $124.5 million in the first half of FY19.

Beyond the sales impact of the bushfires, group earnings have primarily been affected by higher store labour costs and the underperformance of Macpac. These cost increases were prompted by the partial implementation of a retail and clerical enterprise agreement. 

However, the group emphasised a "resilient performance" at Supercheap Auto and Rebel in light of the impact of bushfires and mixed consumer sentiment, while the automotive retailer saw gross margin momentum in the second quarter.

Rebel also had a strong sales and gross margin performance in the second quarter, while the group's online sales grew 22 per cent.

"While first half earnings were challenged by exceptional circumstances, there are a number of positives in the expected result that bode well for the second half," says Heraghty.

Super Retail Group has also donated $250,000 to the Red Cross Disaster Relief and Recovery Fund.

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