I dont really follow Super Retail Group, but it's noteworthy when a $3.5 billion company sees its shares dump >5% after guiding for another record first half sales result.

Of course, the devil is in the detail, and the thing to note here is that despite higher sales ($2.2 billion in the last 26 weeks), profit is expected to drop from the $184.4 million reported in the first half of last year to between $172 million and $175 million this time around. This is mainly because of sales promotions and heavy discounting at Rebel Sport, which meant profit fell around 7% below what analysts were expecting.

My first thought was, "well, that's what happens when a high multiple stock misses expectations", but the PE is only on a forward multiple of 15x.

Perhaps that's not unwarranted given their EPS performance since COVID. They got a huge spike in 2021, but ever since then per share profits have been in decline. It looks like a consequence of a higher cost of doing business, with inflation pushing up wages, rent, and overheads. It's not all just general inflation, though. The group is also working through $26 million to $28 million in duplication costs for its new Victorian distribution centre and a new payroll platform implementation. And, it seems, more theft at Rebel. A sign of the times perhaps.

I'm quite gun shy towards retail these days, so am not tempted by the price fall. But interesting to watch from the sidelines.

Super Retail Group has seen incredible growth for the first 44 weeks of FY21, with online sales and BCF being the real standouts due to covid-inspired demand, and a solid easter trading period.

Indeed, BCF has reporetd 59% like-for-like sales growth, while online sales were 87% higher (online sales have been growing at 64% per year, on average, over the last 4 years (albeit off a very low base).

With less promotions (ie discounts), the company has also seen solid gross margins.

Based on this, per share earnings should easily exceed $1, and could be as high as $1.20. At the lower end of that range, shares are on a PE of just 11.

Excluding this latest super-strong period, the company has managed to deliver pretty consistent growth over the years, averaging around 6%pa since 2012. That's nothing compared to what we've come to expect for a lot fo the tech stocks, but it's a solid effort for a well-established, largely bricks & mortar retailer. A PE of 11 seems pretty cheap.

That being said, 2021 is expetced to be somewhat anomolous and most expect a normalisation of earnings in subsequent years. The consensus guyidance for FY22 is 83c per share.

Still, that gives a forward PE of 14. And with investors able to reasonably expect a fully franked yield of 3-4% from here, the price seems pretty undemanding.

You can read more detail in their latest investor presentation.

I don't hold. I'm generally not a fan of retailers and think increasing competition, especially from large online players, will put pressure on margins over time. Nevertheless, it seems there's some potential here.