Super Retail Group says its 2017 financial year has started solidly, but competitive clearance sales from rival Masters has dented tools sales for its Supercheap Auto business.
"Sales performance in the automotive categories within the Supercheap Auto business has been solid, however, competitor clearance activity in the hardware retail sector has had a negative impact on sales in the business' tools categories," chief executive Peter Birtles said in a trading update on Monday.
Mr Birtles said that negative impact was likely to continue throughout the first half but Supercheap Auto's market share could grow in the second half.
Woolworths is expected to have closed all its Masters stores by early December.
Super Retail's three divisions - auto, sports and leisure retailing - all experienced sales growth during the first 16 weeks of the financial year, albeit at a slower pace than expected.
Cost cuts across the group had offset the slower sales growth, Mr Birtles said.
"We have made a solid start to the year, generating profit in line with budget," he said.
"Sales performance has been pleasing in both the Rebel and Amart Sports businesses with momentum building through the half to date."
Gross margin is also tracking ahead of the prior comparative period, he added.
The sports division, primarily Amart Sports and Rebel stores, saw seven per cent sales growth, with crucial like-for-like sales, which strip out store openings and closures, up 4.5 per cent in the first 16 weeks compared with the same period 12 months ago.
Sales from its auto division, dominated by Supercheap Auto, grew 3.5 per cent, with like-for-like sales up 2.5 per cent, while sales from its leisure division (BCF and Rays) lifted 1.5 per cent with like-for-like sales up six per cent.
The group has completed the closure of 36 of its Ray's Outdoors stores with 11 of them being converted into BCF stores. A further six stores will be converted to other brands in the group during the next six months.
Ten of the 17 remaining Ray's Outdoors stores have been rebranded as Rays and transformed into a new store format with another four to be converted later in the financial year.
Mr Birtles said the new Rays stores were showing promising signs with strong improvement in average transaction value and gross margin.
At 1506 AEDT, Super Retail's share price was down 2.83 per cent, or 30 cents, at $10.30.
