Super Retail Group Faces Margin Squeeze and Rising Expenses in FY25

Updated Sales Growth Figures

Super Retail Group (ASX: SUL) has amended its previously reported sales growth figures for the second half of FY25, specifically for weeks 27 to 44 and the cumulative weeks 1 to 44. While the total sales growth for the full 44 weeks remains steady at 4.2%, the revisions reflect a more nuanced picture across its key brands. Like-for-like sales figures remain unchanged, underscoring consistent underlying performance despite the adjustments.

Segment Performance Highlights

The group’s half-year like-for-like sales growth improved to 3.1% in H2 FY25, up from 1.8% in H1, largely propelled by strong momentum at BCF. This segment saw a notable 10.7% total sales growth in weeks 27 to 44, benefiting from strategic stock investments and a robust Easter trading period. Rebel also accelerated growth despite a $5 million sales headwind from cyclone Alfred, with footwear and health & wellbeing categories performing well. Conversely, Macpac continues to face challenges, particularly due to subdued retail conditions in New Zealand, impacting its sales and inventory management heading into the peak winter season.

Margin and Market Conditions

Despite positive sales trends in some segments, the group’s gross margins in the second half are tracking below the prior comparable period, consistent with the margin pressures experienced in H1 FY25. The Auto category, represented by Supercheap Auto, remains stable but faces a lower growth environment, prompting a strategic shift away from lower-yield promotions while maintaining competitiveness.

Rising Costs and Operational Investments

Super Retail Group is preparing for increased operating expenses linked to significant operational projects. The company is undertaking a major payroll system replacement and building a new Human Resources Information Management (HRIM) system, with implementation expected over the next 12 months. Additionally, duplicated costs from transitioning to a new Victorian distribution centre will continue to weigh on the Group and Unallocated segment. Total costs in this segment are forecast to rise to $42 million in FY25, up from $36 million in FY24, with $29 million in duplicated expenses and project costs expected in FY26.

Looking Ahead

Super Retail Group’s updated trading update and cost outlook highlight a company navigating a complex retail environment with pockets of growth offset by margin pressures and rising operational costs. The strategic investments in infrastructure and systems signal a focus on long-term efficiency, though near-term profitability may face headwinds. Investors will be watching closely how these dynamics unfold through the remainder of FY25 and into FY26.