Financial analysts at Jarden believe Rebel and Macpac's parent company Super Retail Group (ASX:SUL) is set to capitalise on Black Friday this year, but warn that competition and cost challenges may dampen the mood ahead.
In a note to investors, the analysts shared that the retail group’s recent update last week was softer than prior results, with competition intensifying, promotions up and sales slowing.
Macpac, for instance, reported a 10 per cent sales lift in the first 16 weeks of FY25, down from a 15 per cent lift recorded in the first seven weeks.
Jarden analysts also pointed out that overall like-for-like sales were up 2 per cent in the first 16 weeks, with Super Retail’s other subsidiary Supercheap Auto (SCA) also slowing in the period. The weaker New Zealand market, discounting, and timing, are reportedly driving drops at both Supercheap and Macpac.
The analysts added that the group’s gross margin was impacted by elevated discounting for seasonal ranges in Rebel and heightened activity by competitors to Supercheap.
Alongside a rollout of 25 new stores across the group and revamps in loyalty programs and digital in FY25, Jarden analysts believe Super Retail is well-placed to gain market share during the peak period, which is also driven by a clean inventory.
“In our view, SUL is doing a great job, with a consistent message and delivery to the strategy,” the analysts wrote. “Coupled with the likelihood we are near, or at, the bottom of the cycle, this suggests near-term earnings momentum should improve.
“That said, competition is higher and costs continue to rise and, with the above in mind, at c15x EPS [earnings per share] we see valuation as fair and retain our Neutral rating, albeit with a positive bias.
“We continue to see valuation as relatively undemanding, with SCA trading at an implied c35% discount to the market.”
Analysts at E&P Financial Group reported similar sentiments, noting they expected Super Retail to broadly hold its sales growth momentum through 1H25 at a positive 4.5 per cent. However, they shared a key focus on the group’s gross profit margins.
“While no explicit commentary was made on gross profit margins, Rebel gross margins have been negatively impacted by 140bp with the ongoing impact of the new loyalty program (as was expected),” E&P analysts wrote. “This impact is in line with the pcp and has now fully cycled (i.e. no impact on GM for remainder of FY25).
“Further, SUL noted a modest unfavourable impact to SCA margins from its new loyalty program as well as additional promotional activity across both brands.
“Overall, we would view this as a soft update, however, note the share price has also come off recently.”