The Super Retail Group Ltd (ASX: SUL) share price is plummeting after the company released its earnings for the first half of financial year 2022.
At the time of writing, the Super Retail Group share price is $11.59, 9.81% lower than its previous close.
Super Retail Group share price plunges alongside profits
- $1.7 billion of sales, excluding Boxing Day – 4% lower than the first half of financial year 2021
- Statutory net profit after tax (NPAT) of $110.8 million – 35% lower
- Earnings per share (EPS) of 49.9 cents – down from 76.7 cents
- Segment earnings before interest, tax, depreciation, and amortisation (EBITDA) of $329 million – down from $418 million
- Fully franked 27 cent interim dividend announced – down from 33 cents
Super Retail Group struggled over the first quarter, and a rebound towards the end of the first half of financial year 2022 wasn't enough to ensure its recovery.
The spread of COVID-19's Omicron variant saw the company's trade disrupted.
Super Retail Group's cost of doing business also increased as it lifted its investments to support growth and relaxed cost containment measures.
It faced higher wage costs due to retaining staff during lockdowns and absenteeism, as well as increased digital costs.
Additionally, it has chosen to build a strong inventory position for the second half to ward off potential supply chain disruptions.
Its gross margin came to 46.7% – 100 basis points below the previous first half but 170 basis points above the first half of financial year 2020.
Its margin was weighed down by increased freight and transport costs, more home delivery sales, and normalisation of promotional activity in the second quarter.
Though, it was buoyed by improved sourcing, pricing, and tailored ranging of inventory.
Not to mention, over the period the company opened 15 new stores and completed 28 refurbishments and relocations.
Over the half, Super Retail Group's operating cash flows came to $157 million – a drop of $370.2 million.
It ended the period with no bank debt and $94 million in cash.
What else happened in the half?
Over the 6 months ended 31 December, the company reported record online sales.
They increased 64% to come to $389 million worth. That represented 23% of the company's total sales for the period.
Additionally, 'click and collect' sales increased 109% to $226 million, representing 58% of online sales.
3 of the company's 4 major brands saw their sales decline last half.
Only Macpac recorded an increase. Its sales were boosted 4% to $65.5 million due to strong like-for-like sales and new store openings.
Meanwhile, Supercheap Auto's sales dropped 6.9% to $616.1 million.
BCF also saw its sales fall 2.2% to $418.5 million.
Rebel saw its sales decline 2.9% to $605.6 million. Its fall was due to reduced CBD foot traffic during the peak Christmas trading period and delayed shipments of new season stock from key brands.
What did management say?
Super Retail Group CEO and managing director Anthony Heraghty commented on the company's first half, saying:
We are pleased to have delivered a strong top line sales performance in the first half, despite the challenges of Omicron and a disrupted global supply chain.
After COVID-19 lockdowns disrupted trade in the first quarter, we delivered a fast finish to the half, achieving a record second quarter sales result.
Our omni-retail capability and execution has been key to meeting consumer demand, underpinning a record digital sales performance driven by uptake in Click & Collect.
We entered the second half with strong sales momentum, which has continued in the new calendar year. Looking forward, the group will continue to reinvest in the business, including digital, loyalty and network to execute our strategic priorities and grow our 4 core brands.
What's next?
While the company didn't provide guidance, it released a trading update for the first 6 weeks of the second half.
For the first 6 weeks of the second half, excluding Boxing Day, the company's like-for-like sales increased 6%.
BCF is leading the charge, with a 12.2% increase to boast record January sales.
Supercheap Auto is also a top performer, with a sales increase of 9.3%.
Only Rebel is reporting fewer sales, recording a 2.4% drop.
"It has been a positive start to the year," Heraghty said. "We have seen an encouraging uplift in sales momentum as the second half has progressed, with consumer caution starting to recede."
"While COVID-19 continues to cause disruption to our customers, team members and trade partners, the group remains focused on executing our business strategy and investing for growth to deliver long-term value for our shareholders."
Super Retail Group expects to report $125 million of capital expenditure for financial year 2022. That's due to its store development program and investments in its omni, loyalty, and digital capability.
Additionally, it expects global supply chain disruptions to moderate over time, but they will impact its gross margins in the second half.
Super Retail Group share price snapshot
Today's fall has plunged the Super Retail Group share price into the long-term red.
It is now 7% lower than it was at the start of the year. It is also 4% lower than it was this time last year.
