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Here’s why Super Retail Group Ltd skyrocketed today

Shares of Super Retail Group Ltd (ASX: SUL) skyrocketed more than 6% this afternoon after the company provided an update on its activity for the beginning of FY15. The stock is now trading at $7.90 after reaching as high as $8.14 earlier.

Although the company’s Leisure Retail division continues to act as a drag on the Group’s overall performance, investors were pleased after the company reported strong sales growth in its two biggest divisions, being Auto Retailing and Sports Retailing. Sales for the two divisions rose 4% and 3% in the 16 weeks to 18 October 2014, overcoming the tough retail conditions that blanketed the retail sector earlier in the year.

The rest of the year is also looking promising for these divisions with plans to open a combined 24 new stores and refurbish up to 60 stores, while five sports stores will also be closed.

The Leisure Retailing sector, on the other hand, experienced an 8% decline in sales for the first 16 weeks of the new financial year with store cannibalisation and weak trading conditions in mining and regional areas being cited as the main culprits. The company said that a review was underway into its Ray’s Outdoors and FCO businesses which were underperforming.

The company is also expecting to spend $90 million this year (compared to $113 million in FY14) on new stores and refurbishments as well as improving its multi-channel capabilities.

Should you buy?

Now trading at $7.90, Super Retail Group is presenting as an attractive investment prospect. Although reasonable earnings growth is expected over the coming years, the shares are sitting near their lowest price in two years and offer a grossed up 7.2% dividend yield.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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