Shares of Super Retail Group Ltd (ASX: SUL) have risen 1.6% early in today's session after the company which owns retail chains such as Rebel, Ray's Outdoors and Supercheap Auto delivered a mixed trading update for the 44 weeks ended 2 May 2015.
The group's sports division was again the standout performer, recording an increase in like-for-like (LFL) sales of 7.4% and total sales growth of 15%, compared to the year-ago period. Pleasingly, it seems that sales are actually gaining momentum with LFL sales up 9.2% in the last 18 weeks, indicating a strong finish to the year could be on the cards.
On a less positive note, management said that the division's gross margins were down on the prior corresponding period as a result of promotional activity across the Amart Sports and Rebel business lines.
The expansion of the Amart Sports business, together with the impact of lower margin businesses Infinite Retail and Workout World, also acted as a drag on margins during the period. Super Retail said that its BCF business had performed strongly, particularly in the second half, which helped drive momentum in the group's Leisure division.
Although LFL sales were down 1.3% for the entire period, they had improved to 4.1% growth in the last 18 weeks.
The company also said that gross margins were tracking slightly higher in the Auto division, which is centred around Supercheap Auto, but overall sales have been weaker than expected.
Super Retail is "effectively managing the impact of the lower Australian dollar on product costs" while it is also investing in the Supercheap Auto Club Plus loyalty program, which it hopes will drive sales growth in the future.
Indeed, it's been a rollercoaster ride for shareholders over the last year but the stock has recovered strongly since December. After it bottomed out at $6.70, it has since surged 50% to be trading at $10.04. Although Super Retail still presents as a reasonable investment, there is one retailer which could be an even greater buy right now (and it pays a huge dividend, too).
