Why Super Retail Group Ltd (ASX:SUL) shares are storming higher today

One of the best performers on the local market on Friday has been the Super Retail Group Ltd (ASX: SUL) share price.

In morning trade the retail conglomerate’s shares were up as much as 5.5% to $8.16 at one stage. They have since dropped back a touch but are still up 3.5% to $7.98 at the time of writing.

Why are Super Retail’s shares on the rise?

With no news out of the retailer, today’s gain is likely to be attributable to a broker note out of Ord Minnett this morning.

According to the note, the broker has upgraded Super Retail’s shares to a buy rating from hold. Furthermore, its analysts have lifted the price target on its shares to $9.00 from $8.00.

This price target implies potential upside of almost 13% over the next 12 months based on the current share price.

Ord Minnett made the move on the back of its view that the Australian consumer outlook is not as soft as many have suggested. The broker has pointed to growth in employment and Amazon’s subdued launch as reasons to be positive.

In addition to this, its analysts are of the belief that Super Retail’s shares offer an attractive risk/reward at their current level.

Should you invest?

I think that Ord Minnett makes some fair points and I would have to agree that Super Retail is an attractive option for investors.

As I have said previously, I do have concerns over its Leisure segment and would have preferred to see management offload it rather than add to it. But management appears confident that its acquisition of Macpac will solve everything and lead to a successful turnaround.

Another reason to consider an investment is its dividend. Its shares currently provide a trailing fully franked 5.8% yield, well above the market average.

But if you’re not convinced about the Leisure segment turnaround, then you might want to consider industry peers Bapcor Ltd (ASX: BAP) or Supply Network Limited (ASX: SNL) instead.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of Super Retail Group Limited and Supply Network Limited. 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 Scott Phillips.

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