Super Retail Group Ltd (ASX: SUL) was a scorching pandemic winner. The retailer's shares skyrocketed 230% from a trough in March 2020 of about $4 to a peak of $13.73 in June 2021.
Immediately before the COVID-19 market crash, the Super Retail share price was $9.66. Today, the stock is trading lower than that. It's currently $8.52, up 3.3% for the day on Thursday.
During Tuesday's market meltdown, the shares hit a new 52-week low of $8.06.
Super Retail Group owns four brands — Rebel (sportswear), BCF (boating, camping, and fishing supplies), Supercheap Auto (car accessories), and Macpac (hiking equipment and clothing).
Over the first 18 months of the pandemic, the Super Retail share price soared. One of the reasons it did so well was because of the international border and state border closures, which prevented overseas and interstate trips. People got into their cars and went boating, camping, and fishing within their own states instead.
FY22 headwinds impacting Super Retail share price
The second part of the pandemic has brought some challenges for Super Retail Group.
In FY22, extended lockdowns during the second half of 2021 affected sales.
With the Omicron strain rife, staff absences and wage increases to keep them have been headwinds. And global supply issues have affected Super Retail as much as any other ASX retail share.
To deal with these headwinds, Super Retail built a strong inventory position for the second half of FY22 to counteract supply chain disruptions. It also opened more stores and continued to invest in ramping up its digital presence to encourage more online sales.
Reduced sales and higher costs contributed to a profit tumble in first-half earnings.
The latest update for ASX investors
In a presentation at the recent Macquarie Australia Conference, Super Retail revealed group sales are up.
YTD like-for-like group sales are up 24.7% in FY22 compared to FY20, and down 1.3% on FY21.
Super Retail has also added a net 30 stores to its network (as of January 2022). Its active club members — defined as a customer who has shopped during the past year — increased by 2.4 million to a total of 8.7 million between H1 FY20 and H1 FY22.
Online fulfilment costs have decreased by 120 bps as a result of both lower freight expenses and higher freight recovery over the same time frame.
Online sales have increased from 7% to 23% of total sales between H1 FY19 and H1 FY22.
Overall, the company said it was making progress on its refreshed corporate strategy announced in 2019. The presentation focused on four key areas including store network optimisation and refurbishment, digital and omni-retail capability, personalisation and customer loyalty, and supply chain efficiency.
According to the presentation:
The Group's investment for future growth is delivering business improvements. These will provide a platform to sustainably generate value for our shareholders.
What do brokers think of the Super Retail share price?
Citi has a buy rating on Super Retail shares and a 12-month price target of $14. The broker believes the market's concerns are overplayed.
Citi says:
We continue to view the market's concerns about Super Retail's elevated inventory position to be significantly overplayed given these strong sales trends, likely minimal risk of ageing given where the inventory is held and management's perspective on the risks to its supply chain.
Citi is expecting Super Retail to pay a fully franked dividend of 66 cents per share in FY22 and 64 cents per share in FY23. That's a grossed-up dividend yield of about 11% per year based on today's share price.
Credit Suisse also says buy and has the same price target of $14. The broker expects a grossed-up dividend yield of 10.75% in FY22 and 8.3% in FY23.
