What: Specialty retailer Super Retail Group Ltd (ASX: SUL) has literally halved in price since Nov 2013 from $14 to $7 recently. That was, however, until today when it shot up more than 11% in morning trade.
So What: It took that incredible one-day jump because of speculation a foreign sports retailer may be interested in taking a position in Super Retail Group. According to The Australian Financial Review, some shareholders had been approached to see if they wanted to sell shares of the auto accessories and sports equipment retailer.
The company stated it has not heard anything directly, but the AFR went on to say that possibly Sports Direct (a UK retailer) or the world's largest sports retailer, Intersport, may be behind a move to secure a strategic stake.
Now What: Super Retail Group released a trading update in late October showing its Supercheap Auto segment and sports segment both had good sales growth over the past 16 weeks. However, that didn't halt the stock's slide down to $7.
In addition, there has been some indication that retail trade in general may pick up as we go into the Christmas holiday sales season. Both these factors may have made Super Retail Group too cheap to pass on.
Both foreign sports retailers have plans to expand into Australia. Super Retail Group owns two well-known sports franchises, Rebel Sports and Amart Sports, so Sports Direct or Intersport may want to get a foot in the door for such a move.
I wouldn't advise investors to take positions in Super Retail Group based solely on this very speculative move or market rumours. Still, I have suggested as recently as last month that Super Retail Group has fallen in share price probably too much and that it could be a good buy for value investors.
Despite the sudden jump up, it still offers a hefty 5.13% yield. I continue to think investors should have Super Retail Group in their portfolio because of the positive outlook and a good margin of safety in the share price.
