With consumer expenditure confined to local leisure and domestic pursuits,
-To benefit from elevated domestic leisure expenditure
-Online sales growth accelerates for each brand
-Gross margin expansion likely to ebb
As the pandemic put retail focus squarely on local leisure activities and home-based consumption,
The re-opening of
Credit Suisse expects
Macquarie is more circumspect, preferring to wait for more information on just what level of sustainable earnings the market is willing to capitalise, and whether trends normalise when international borders re-open.
Like-for-like sales were up 25% in the first quarter amid particular strength in BCF, up 61%, Supercheap Auto, up 21%, and Rebel, up 16%. The underperformance in Macpac, where sales were down -1% in the quarter, was largely attributed to the temporary closures of stores in
The closures, including 94 of the company's stores in
Online sales growth exceeded 100% in each brand, Credit Suisse notes, because of a significant investment in digital capability undertaken over recent years. Capital expenditure guidance has also increased to
Re-Opening
The company is placed to benefit from the re-opening of state borders while international borders remain closed. This should benefit Supercheap Auto as well as outdoor camping categories in BCF.
This mostly affected BCF but also Supercheap Auto, which has a regional skew.
While recognising conditions are favourable, the broker, not one of the seven monitored daily on the FNArena database, is mindful of an eventual re-balancing towards international travel and, given valuation, retains a Hold rating with an
Margins
The main positive taken from the company's commentary was gross margins, up over 200 basis points and supported by reduced promotional intensity. This is positive for earnings and Citi expects 29% EBIT growth in FY21.
However, the broker is mindful this rate will then be difficult to cycle and growth should "normalise" over FY22. Morgans agrees, as inventory improves and the company invests in price to protect its position over the longer term, gross margin expansion will be tempered.
The broker asserts current sales rates cannot continue into the second half although the trends remain positive.
FNArena's database has five Buy ratings and two Hold. The consensus target is
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