Super Retail Group (Super Retail, ASX: SUL) with a share market capitalisation of $4.1 billion turns over $4 billion annually, making it one of Australia and New Zealand’s largest retailers. Its four core brands cover motor accessories, outdoor leisure equipment, sporting goods and outdoor clothing. The Group was founded in 1975 and has been listed on the ASX since 2004. Today Super Retail employs 16,063 people across 759 stores.

Strategic Drivers

Super Retail’s strategic focus is four core brands in the key categories of motor accessories, outdoor leisure equipment, sporting goods and outdoor clothing, leveraging operating scale to maintain low selling prices. It builds scale by continuing to open new stores and refurbish existing outlets. Over the past 5 years Super Retail has opened 94 new stores and carried out 194 store refurbishments. The Group’s 759 existing stores enable it to execute major advertising campaigns because of the deep relationships with global suppliers providing exclusive brands and exclusive ranges to customers.

Super Retail has built a fit-for-purpose, integrated supply chain connected to automated distribution centres using a proprietary warehouse management system backed up by an international freight system with new partners. This ensures efficiency in order management and delivers the highest standard of customer order fulfillment and service all year round.

The Group’s Information Technology capability is driving online sales that in FY24 were $485 million, representing 13 percent of total Group sales. Super Retail has established a quantitative pricing capability to improve pricing, markdown and clearance outcomes and IT services have been fully migrated to the public Cloud, improving efficiency and security.

Enduring customer loyalty

The Group set a target in April 2022 of 10 million active customers by 2025. At June 2024 Super Retail had 11.5 million active customers who comprise the Group’s loyalty program. Active club members account for 75 percent of total sales across the Group, with club member sales consistently growing faster than total sales. The large customer loyalty base is supported by a data science unit that focuses on personalisation using analytical insights to execute improved pricing and customised promotions. This is a significant competitive advantage which is proving to be an effective shock absorber for the peaks and troughs of the economic cycle.

High dividend payout ratio likely to continue

The Group finished the 2024 financial year with a net cash position of $218 million, up from $192 million in June 2023, and with no drawn bank debt. This was after Super Retail made $133 million in corporate tax payments in FY24, compared to $64 million in FY23.

Super Retail achieves a high gross margin (sales less cost of sales) of 46 percent, however high inflation has pushed the cost of doing business higher as a percentage of sales to almost 36 percent, resulting in a pre-tax profit margin of 8.8 percent in FY24. However, Super Retail’s impressive cash conversion ratio saw cash flow from operations at $635 million in FY24, which enables the Group to pay out 65 percent of the full year underlying Net profit After Tax in fully franked dividends.

The Group targets a long-term bank debt gearing ratio of between zero and 0.5 times net debt to EBITDA. This conservative balance sheet combined with a high profit to cash conversion ratio implies a continuation of the current 65 percent payout ratio of fully franked dividends, at least in the medium term.

Strong start to FY25

The first seven weeks of the 2025 financial year have been marked by brisk trading activity across all four core brands with total Group sales 5 percent higher than the corresponding period in FY24. Sales growth on a like-for-like basis is up 3 percent. This is a positive start to the 2025 financial year and underscores Super Retail’s value-focused product offerings that are consistently resilient during a challenging retail trading environment. The strong start to the 2025 financial year combined with any improvement in the current soft economic conditions should deliver a favourable result for Super Retail shareholders, particularly in FY26.