Rising Costs Challenge Super Retail Group Despite Solid Sales Momentum
Super Retail Group reports steady sales growth driven by BCF and rebel brands, while facing increased costs from a new distribution centre and HR system upgrades.
- Group sales growth of 4.2% for first 44 weeks of FY25
- Strong momentum from BCF and rebel brands
- Gross margins tracking below prior periods
- FY25 Group & Unallocated costs rising to $42 million
- Costs driven by Victorian distribution centre transition and HR system project
Steady Sales Growth Despite Challenging Conditions
Super Retail Group has delivered a solid trading update for the first 44 weeks of fiscal year 2025, reporting an overall sales growth of 4.2%. This performance reflects a notable improvement in the second half of the year to date, with like-for-like sales growth rising to 3.1% compared to 1.8% in the first half. The growth momentum has been largely driven by strong performances from BCF and rebel, two of the Group’s key brands.
While the Easter trading period was robust, retail conditions remain subdued, particularly in New Zealand, which continues to weigh on Macpac’s results. Supercheap Auto’s sales were flat in the second half, reflecting ongoing challenges in the auto category, although there are signs of stability emerging in April.
Margin Pressure and Strategic Shifts
Despite the encouraging sales figures, gross margins are tracking below the prior comparable period, continuing a trend seen in the first half of the year. The Group has been strategically moving away from lower-margin promotional activity, especially in the auto segment, aiming to balance competitiveness with profitability in a low-growth environment.
Rebel’s acceleration in sales growth is particularly noteworthy given it absorbed a $5 million net sales headwind from cyclone Alfred. Footwear and health & wellbeing equipment categories remain strong contributors, while apparel sales showed resilience despite a slower seasonal transition into winter.
Rising Costs from Operational Investments
Super Retail Group has flagged a significant increase in Group and Unallocated costs for FY25, expected to reach $42 million, up from $36 million in FY24. This rise is primarily due to duplicated operating expenses related to the transition to a new Victorian distribution centre and the rollout of a new payroll and Human Resources Information Management (HRIM) system.
The Group anticipates these costs will continue into FY26, with combined expenses from the distribution centre transition and HRIM project estimated at $29 million. These investments underline the Group’s focus on modernising its operational infrastructure, though they will weigh on near-term profitability.
Looking Ahead
As Super Retail Group prepares for its peak winter trade season, particularly for Macpac, the company faces a balancing act between sustaining sales momentum and managing margin pressures amid rising operational costs. Investors will be watching closely how these investments translate into long-term efficiencies and growth.
Bottom Line?
Super Retail Group’s growth story is steady but will be tested by rising costs and margin pressures in the near term.
Questions in the middle?
- How will margin pressures evolve as the new distribution centre and HRIM system come online?
- Can Macpac overcome subdued New Zealand conditions in the critical winter quarter?
- What impact will the increased Group & Unallocated costs have on full-year profitability?
