The Super Retail Group Ltd (ASX: SUL) share price is edging higher today as the company released an announcement this morning informing the market that it has cancelled its interim dividend.
The company also provided the market with an extended outlook on its operations and elaborated on the impact of the COVID-19 pandemic.
Why is Super Retail cancelling its interim dividend?
The management board at Super Retail have decided to cancel the company’s FY20 interim dividend, citing the uncertain duration of the COVID-19 pandemic and its potential impact on trading. Super Retail announced an interim dividend of 21.5 cents per share earlier this year. Cancelling the pay-out of its dividend will result in $43 million of cash being retained by the company.
According to management, cancelling the dividend payout and preserving cash is the most prudent strategy in the current market environment. The decision will allow Super Retail to maintain liquidity and protect shareholder value.
How has COVID-19 impacted Super Retail?
Super Retail, which owns Supercheap Auto, Rebel Sport, Macpac and BCF, reports that group gross margin has remained steady up to 21 March 2020. The market update outlined that Super Retail has maintained positive sales momentum for its two largest brands and has benefited from having a diverse portfolio of businesses.
The group also elaborated that less than 20% of its stores are located in large shopping malls, where foot traffic has declined, and stores also supply products of an essential nature. The company noted that there has been an increase in demand for self-sufficiency products such as portable gas and fuel, camping stoves, generators, refrigeration equipment and hygiene products.
According to management, the group’s online business has been operating normally with customers making full use of the home delivery and click and collect services. According to Super Retail, the company has seen 21% growth in online sales as at the week ended 21 March.
The COVID-19 pandemic has wreaked havoc on retailers in Australia, with many companies having to close stores and let go of workers. As the government issues greater social isolation and distancing measures, the short-term outlook looks bleak for the sector.
Super Retail acknowledged that due to the COVID-19 pandemic, the outlook for overall sales is highly uncertain given the evolving situation. As a result, the company is unable to give an overall indication of how the pandemic will impact the company financially. In the meantime, Super Retail’s Australian stores will continue to trade under a number of safety measures.
The Super Retail share price has followed the trend of most major retailers and is down more than 60% from its February highs. At the time of writing, the Super Retail share price is slightly higher in early trade.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group 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.