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Super Retail Group (SUL)

A few weeks ago we sold Wesfarmers (WES) from the Income Portfolio after a solid run and today our attention moves to Super Retail (SUL) after rallying 5% yesterday morning only to see those gains evaporate by the afternoon. The issue now becoming obvious in retail is a result of the very strong sales achieved through COVID, and the high bar this now sets for the sector on a comparative basis. MM are now becoming more cautious on retail generally.

In a trading update yesterday, Super Retail Group (SUL), the owner of brands like Rebel Sports, Macpac, BCF and Super Cheap Auto said that like for like (LFL) sales growth at the group level was up 28% for the first 44 weeks of the year versus FY20 – clearly a very strong number, however they also went on to say that the group will now report FY21 LFL sales against both FY20 & FY19 to enable a comparison with non-COVID trading conditions. This is a smart move and we expect retailers to adopt it, however it’s a clear sign that retailers themselves see the risks associated with comping a very strong period, and this is a way of diluting the return to more normal trading conditions.

While we are essentially flat on our holding in Super Retail Group (SUL) we see little catalyst for gains in the short term and better risk/reward elsewhere i.e. National Storage (NSR) which we have covered recently.

SUL
MM are planning to sell SUL from the Income Portfolio
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Super Retail (SUL)
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