Super Retail profit falls, stocks surge

Investors are placing faith in the future outlook of Super Retail, with shares rocketing despite the company nearly halving its first half profit.

Lower petrol prices and interest rates are helping fuel a sales surge for the retailer behind Rebel sports stores and Ray's Outdoors.

Super Retail Group, which also owns Supercheap Auto, has enjoyed a sales lift across its leisure, auto and sports stores since late December.

The welcome sales boost comes after the group's first half net profit nearly halved to $33.6 million in the 26 weeks to December 27.

The result was dragged down by costs linked to a major restructure of its leisure business, which includes Ray's Outdoors, and its decision to close its troubled New Zealand-based Fishing Camping Outdoors (FCO) chain.

Chief executive Peter Birtles said things were looking brighter, with like-for-like sales up 3.5 per cent in the auto division, 6.5 per cent in leisure and nine per cent in sport during the first seven weeks of the second half.

Mr Birtles said all three divisions were benefiting from the slide in world oil prices and local interest rates, which encourage consumers to spend more on discretionary items.

"Customers will be seeing more money in their pocket at the moment because they're spending less on fuel prices," he said.

However, he was cautious about market competition and the potential of rising unemployment affecting consumer confidence.

Mr Birtles said the leisure business struggled during the first half with the mining slowdown, along with new stores cannibalising sales at existing stores.

"As we move into February, we're now clean of that cannibalisation effect," he said.

"Importantly, the business increased gross margins through more effective promotional management."

Super Retail plans to revamp its struggling leisure division by restructuring the Ray's Outdoor chain and closing FCO.

It hopes to reinvigorate its Ray's Outdoors chain with a new adventure offering in an attempt to grab up to $2 billion of the outdoor retail market.

Ray's Outdoors will test three new store formats in the first half of 2015/16, while clearing certain product ranges and closing or relocating five stores.

The group decided to close FCO after a major review found it was unlikely the division would achieve the group's return on capital hurdles within a reasonable time.

Shares in Super Retail Group surged 88 cents, or 10 per cent, to a nine-month high of $9.71.

"Super Retail has been severely beaten up over the past year, they've been under pressure, but now the decks have been cleared and the market believes it's moving in a new direction," IG Markets strategist Evan Lucas said.

SUPER RETAIL SUFFERS

* Net profit of $33.6m, down 45.5 pct from $61.6m

* Revenue of $1.16b, up 5.7 pct from $1.1b

* Fully-franked interim dividend steady at 18.5 cents a share


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3 min read

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Source: AAP


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