Super Retail Group Ltd reports tomorrow: Here’s what every investor needs to know

Australia and New Zealand-based leisure and retail company Super Retail Group Ltd (ASX: SUL) is due to report its financial performance for the 6 months to 31 December on 19 February.

The group currently operates approximately 650 Amart Sports, BCF, Avanti Fitness, Goldcross Cycles, FCO (Fishing Camping Outdoors), Ray’s Outdoors, Rebel, Supercheap Auto and Workout World stores, but disappointed investors in October 2014 with a subdued trading update.

Tough Conditions

Super Retail, like many of its discretionary retail counterparts, has struggled in recent times as consumer confidence and spending stalled in the face of the unstable Australian political environment and negative reporting of the state of the Australian economy.

The company’s trading update in October reported that the first four months of the financial year had seen auto segment like-for-like sales increase by 4% while sports increased by 3%. Unfortunately however, like-for-like leisure segment sales (35% of revenue) decreased by 8% and cost pressure saw gross margins decrease compared to the previous period.

Despite the group announcing the opening of 28 new stores in the 2015 financial year, which ends on 30 June 2015, analysts cut their net profit forecasts for the year by between 5% and 15%.

The Numbers

For the full 2015 financial year, Australia’s major analysts expect Super Retail to generate around $110 million net profit after tax, earnings per share of around 55 cents, and pay a dividend of 40 cents. At the current price of $8.60, this would represent a dividend yield of 4.7%, grossed up to 6.6% with 100% franking.

Dividend Surprise?

Following the disappointing earnings results from competitors in the discretionary retail space, including Kathmandu Holdings Ltd (ASX: KMD) and OrotonGroup Limited (ASX: ORL), I would be very weary of holding a large portion of my portfolio in Super Retail stock for the dividend. While some upside is possible, analysts don’t appear convinced that weakness in the group’s leisure segment will pass any time soon.

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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie

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