Like many businesses, the company has grown rapidly through COVID thanks to an online shopping boom, aided by a $200 million capital raise early in the pandemic to help bolster its online offering and omnichannel.
Industry: Retail of automobiles, sports and outdoor activities.
Main products: Auto parts, sporting goods, camping gear, puffer jackets.
Key Figures: CEO Anthony Heraghty, Chairman Sally Pitkin, Non-Executive Director and Co-Founder Reg Rowe.
The case of the bull: In the company’s full-year results last week, Super Retail revealed a 2.8 percent rise in annual sales, but a 20 percent drop in net profit and a drop in margins. While these look like significant drops, they compare to the COVID-driven all-time highs of 2021, and analysts say the business is still in good shape.
MST Marquee Senior Analyst Craig Woolford told clients in a research note that Super Retail reported a “strong result with good momentum,” highlighting the company’s preliminary business figures for the start of the new fiscal year, which showed sales growth of 17 percent across the group. led by outdoor brand Macpac, which reported 42 percent growth through July.
Macpac’s performance has been of particular interest to investors, as the business has been stagnant for many years. Its sales for fiscal 2022 grew 15 percent, helped by a strong episode of cold and wet weather.
Online trading continues to stand out, thanks to its investment during the pandemic. In the last 12 months, the company reported a 44% increase in online sales to $601 million, which represents almost 20% of total sales.
The case of the bear: As analysts praised the company’s sales growth, they simultaneously wrung their hands over a potential problem that has plagued many of Super Retail’s peers: too much inventory.
The company has about $800 million in stock, up 15 percent from last year. Some analysts pointed to the risk that a slowdown in consumer spending could leave the company with excess inventory it can’t move, leading to deep discounts and weaker profit margins.
Heraghty defended the choice, saying it’s a “safety stock” to guard against further shipping delays, and Citi analyst Adrian Lemme said a $100 million decrease in inventory, compared to the first half of the fiscal year, “removes at least part of the downside of the bear case.”
However, Super Retail could still be exposed to a deterioration in consumer spending as businesses like Macpac, Rebel and BCF are largely discretionary and could be cut back as household budgets tighten.
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