Why shares of Super Retail Group Ltd jumped on Friday

Shares of Super Retail Group Ltd (ASX: SUL) have risen 4.5% today following the release of the group’s full-year earnings results this morning.

For the 53 weeks to 2 July 2016, normalised net profit for the group rose 2.2% to $108.6 million while earnings per share (EPS) fell to 31.8 cents, down from 49.4 cents in 2015. Total group sales were up 8.2%, driven predominantly by a strong performance in the group’s Auto and Sports Divisions.

Indeed, Supercheap Auto recorded like-for-like sales growth of 4.4%, with second-half sales growing stronger than the first half together with an improvement in margins. Although that is a reasonable rate of growth, however, it does compare to the 5.2% same store growth reported by Autobarn, owned by Bapcor Limited (ASX: BAP), over a comparable period.

Super Retail Group’s Sports division performed even stronger than Auto. Rebel and Amart Sports recorded total transaction growth of 3.2% and average transaction value growth of 3.3%, with like-for-like sales growing 6.3% during the year. As was the case with Auto, earnings margins also improved helping to improve overall profitability.

Unfortunately, however, the Leisure division continued to weigh on the group’s overall result, caused partially by the weaker performance of the BCF business in the first half, and continued underperformance of Rays (formerly Ray’s Outdoors). Super Retail Group did note improvements during the second-half, however, which will act as an encouragement for investors.

Commenting on the results, Super Retail Group’s Managing Director and CEO Mr Peter Birtles said:

The transformation of the Ray’s Outdoors and Infinite Retail businesses and the completion of the supply chain transformation project mean we have addressed issues that have constrained earnings growth in recent years. We have a portfolio of market leading businesses with capacity for significant top line growth through new stores and like for like growth, and for margin improvements driven by customer engagement, range and promotion management and supply chain productivity.”

Meanwhile, the group was encouraged by its activity so far in the new year, stating that each division has thus far delivered positive like-for-like sales growth. Leisure appears to be the high-flier so far, recording around 10% like-for-like growth, while Auto and Sports have grown 3.5% and 4% on a comparable basis, respectively.

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Motley Fool contributor Ryan Newman owns shares of Bapcor. The Motley Fool Australia owns shares of Bapcor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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