Super Retail's leisurely rewards

While major retailers bemoan the effects of weak consumer confidence on sales, Super Retail's winning mix of cars, camping and sport has seen it go from strength to strength.

In retail, there are two types of shoppers, those who love to shop, and those who find shopping a chore. Most retailers sound like they are also in the latter category, if the constant doom and gloom mongering are anything to go by.

A rare exception is Super Retail. While its peers bemoan weak consumer sentiment amidst economic uncertainty, Super Retail is hitting the high street with a spring in its step. It has declared it wants to become one of the five largest retail companies in Australia.

Focusing on tapping into the leisure time and interests of individuals has allowed Super Retail to increase sales when general retailers are faltering. Where cost cutting is the prevalent theme for retailers to offset anaemic top-line growth, Super Retail has gone the opposite way and invested $104 million in its business last financial year. That’s just under half of the group’s operating cash flow. Capital expenditure will continue this year and an additional $110 million will be invested in new product lines and supply chain logistics.

Chief executives of most retailers have been unhappily fixated on the flatlining consumer confidence chart below for almost six years now. Not so Super Retail. Its rise to an all-time high yesterday proves this metric has little to do with its share price performance. Consumer confidence has been relatively flat, Super Retail has gone from strength to strength.

Graph for Super Retail's leisurely rewards

This strength has largely been driven by their product offerings, where Ray’s Outdoors, Boating, Camping, Fishing, and Supercheap Auto appeal to not just retiring baby boomers looking to fill their new-found leisure time but also to consumers who have been uncharitably described as 'cashed-up bogans'. While still discretionary, the group’s offering means items can be enjoyed on more than one occasion.

Morgan Stanley carries high hopes and has gone as far to say they expect Super Retail’s earnings to double in five years. The group has delivered an 18.9 per cent compound annual growth rate in earnings per share since 2006 so has the track record to grow earnings. Even a cyclical downturn didn’t disrupt earnings, suggesting a resilient business model and product offering regardless of economic climate.

Super Retail’s performance in the first 16 weeks of this financial year has been solid – like for like sales have increased across each division. Auto came in 3 per cent higher, leisure 5 per cent higher and sports 6 per cent higher.

Growth prospects don’t look like slowing anytime soon as the company’s existing infrastructure has the capacity to support higher sales, allowing the rollout of additional stores at minimal costs. Increasing the number of stores will help sustain sales growth and gain market share along the way.

There is something to be said about specialty retailers with niche offerings – JB Hi-Fi, Kathmandu and Super Retail continue to push higher as other retailers flounder.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles