August is over and that means the flood of results of ASX reporting season has finished as well. This season, there were a few ASX shares that surprised me — not all of them positive.
Earnings season is an interesting time. Not only are we looking at the actual numbers that the businesses reported, but we're also judging how they perform compared to what was expected of them.
What can be particularly interesting for some investors is the outlook commentary. This can have an influence on whether people are going to be positive or negative about the business in the upcoming financial period. As we know, the market is normally focused on the future.
With that in mind, these are three ASX shares that changed my mind.
Super Retail Group Ltd (ASX: SUL)
This ASX share is the business that owns the retailers Supercheap Auto, Rebel, BCF, and Macpac.
Considering the economic uncertainty of the past year, the FY23 numbers seemed good. FY22 had 53 weeks and FY23 had 52 weeks, so the company provided an adjusted comparison of both financial years on a 52-week basis so that investors can compare apples to apples.
On that 52-week comparison basis, total sales increased 9%, segment earnings before interest and tax (EBIT) grew 12%, normalised net profit after tax (NPAT) rose 14%, while statutory NPAT improved 11%.
I went into reporting season thinking that the business wouldn't be as defensive as it's currently performing at the start of FY24. In the first six weeks of FY24, total sales were up 2%, while other retailers are seeing declines. The company is also planning to open 24 new stores during the 2024 financial year. This can be supportive for the company's overall sales and offset some of the same-store sales decline (if there is a bit of a dip).
I'm not saying it's the best opportunity on the ASX, but it impressed me. According to Commsec, the business is valued at 14x FY24's estimated earnings with a forecast grossed-up dividend yield of 7.3%.
Cettire Ltd (ASX: CTT)
Cettire is certainly an interesting business. it's a global online retailer that sells a large selection of personal luxury items through its website Cettire.com. The ASX retail share sells over 500,000 products from over 2,500 luxury brands across clothing, shoes, bags, and accessories.
An online retailer of luxury goods doesn't strike me as the sort of business that would necessarily perform well during tighter economic times. Certainly, many online retailers are facing demand volatility after the end of COVID lockdowns which helped online sales in the prior corresponding period. Yet, Cettire is financially smashing it.
In FY23, the business achieved sales revenue growth of 98% to $416.2 million, while active customers increased 63% to around 423,000. It said that 58% of its gross revenue came from repeat customers, up from 50% in FY22. It's done so well that it generated $16 million of statutory net profit.
Looking at the trading update for July 2023, sales revenue increased 120% year over year, while "adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) profitability has been maintained".
Indeed, it's doing much better than I thought it would.
Credit Corp Group Limited (ASX: CCP)
Credit Corp is one of the largest debt collectors in Australia. It also has a presence in the US.
Before seeing the company's FY23 result, I thought the business would be seeing more activity and that it would be thriving in this kind of economic environment.
The ANZ lending segment was the standout. Revenue rose 58% to $147.8 million and NPAT increased 70% to $35.1 million. However, the net profit of the ANZ and US debt-buying segments decreased by 29% and 21% respectively, leading to total net profit falling 5%.
The company explained that in the US, "the final quarter showed that collection conditions may have deteriorated as the company experienced repayment plan delinquency".
Meanwhile, the purchased debt supply in the ANZ debt market remained "constrained". At the same time, the FY24 investment pipeline was "modest" and "a further contraction in segment earnings is expected in 2024". Conditions may change and enable the business to purchase more debt ledgers, but it surprised me that profits for the debt-buying segments fell as much as they did.
