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Super Retail Group Ltd jumps on positive result: Should you buy?

Shares of Super Retail Group Ltd (ASX: SUL) lifted by more than 6.3% on Thursday after it reported its interim results. For the 26 weeks ended December 27, the retailer’s net profit ($33.6 million) slipped by 45.5% compared to the prior corresponding period, despite a reasonable lift in group sales across the period.

The group’s overall profit was impacted by $26.9 million in costs associated with the planned exit of its FCO Fishing Camping Outdoors business, and the restructuring of its Ray’s Outdoors business. The group’s adjusted net profit was $58.1 million.

Total sales jumped 5.7% for the half, driven by a strong performance from the group’s Auto and Sports retailing divisions. Here’s a summary of how each division performed:

  • Sports Division: sales up by 13.9% to $421.5 million; or a 6.1% increase on a like-for-like basis
  • Auto Division: sales up 4% to $431.5 million; or 2.1% like-for-like sales growth
  • Leisure Division: sales down 1.6% to $302.1 million; like-for-like sales down 5.1%

The Leisure division continues to be impacted by cannibalisation and a slowdown in the mining sector, but the company said the impact of these factors had begun to diminish as the half progressed, while margins had also improved. Pleasingly, the second-half has also started on a very positive note for the group with the company hopeful of an even stronger end to the year.

In reference to all business divisions, Super Retail Group’s Managing Director, Peter Birtles, said:

“We will be focusing on lifting gross margin but we need to be careful to manage the trade off with sales momentum in an environment in which customer confidence is still patchy. Our ability to manage this trade off will be critical in generating EBITDA (earnings before interest, tax, depreciation and amortisation) margin outcomes.”

The company also declared a fully franked dividend of 18.5 cents per share, fully franked, which is in line with last year’s distribution. As good as that is, there’s an even more appealing dividend stock to buy right now.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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