Super effort for retailers in tough market

• by: John Beveridge

Super Retail Group chief executive Peter Birtles and chairman Robert Wright. Source: The Courier-Mail

RETAIL in general might be struggling, but the team at Super Retail group have shown what can be achieved even in a really tough environment.

In retrospect, it looks like the group picked up Rebel Sport very close to the bottom of the market and have managed to not only grow comparable sales in all of their chains but also pay a higher dividend.

When you see net profit rising 40 per cent on sales that jumped 35 per cent it is a very good sign that management are not just going for growth, but have a very close eye on improving margins and cutting costs.

Super Retail's aim is to be a specialist retailer in several niche areas, which is one of the reasons it may have avoided the worst of the retail downturn.

At the moment its 560 stores are spread across seven brands, Amart All Sports, BCF (Boating, Camping, Fishing), FCO (Fishing, Camping, Outdoors), Goldcross Cycles, Ray's Outdoors, Rebel Sport and Supercheap Auto.

While its stores remain its main focus, Super Retail is also highly advanced in developing various forms of online retail, including specific smartphone friendly websites, a click and collect service and an online catalogue system that can be used to order products not available in store.

At the back of the store, online logistics have been developed to keep the flow of products from China synchronised with sales.

The thing I really like about the Super Retail result, though, is their underlying sense of urgency, with internal targets for a range of issues including staff retention and engagement, safety, succession planning and candidate attraction.

On several of those measures it is tracking above retail industry averages but below internal targets, suggesting a company that is striving for continuous improvement.

The share price has been zooming upwards including a 6.4 per cent rise yesterday .

If Super Retail can do this well in a terrible retail sales environment, it should be an exceptional performer once consumers begin to open their wallets again in earnest, so it retains a long term buy in the dips rating.

SPEAKING of tough markets, advertising is notoriously tight at the moment, which is showing up in the results of the major media groups.

Kerry Stokes' merged Seven West Media has ridden that flat advertising market exceptionally well, with a marginal 6 per cent fall in pre-tax earnings compared to the previously independent West Australian Newspapers and Seven Media Group.

It is a very different story over at Ten Network Holdings, where a flagged profit downgrade saw half year pre-tax earnings fall off a cliff -- down 40 per cent to a puny $64 million.

The reason for the tale of two cities is not hard to find, with Seven reinforcing its ratings dominance in television while Ten heads in the opposite direction.

Seven now speaks for an amazing 38 per cent of the television advertising market as it continues to dominate the ratings while Ten hasn't even been able to cut costs as fast as its revenues are falling.

Given Ten's debt levels, it is playing with fire now and will need to quickly turn the ship around and preserve cash, which is why the interim dividend was unceremoniously dumped.

Chief executive James Warburton is claiming new and returning shows such as Breakfast, Bikie Wars: Brothers in Arms, Offspring and MasterChef Australia will rejuvenate ratings and advertising this year, but I rate the stock an avoid until those runs are on the board and the potential for a capital raising has dissipated.

Seven West Media is a very different story and it should offer some turbocharged returns once the advertising cycle turns.

With a tight rein on costs and a broad spread of media vehicles across Yahoo, Seven, television, magazines, newspapers and Seek, Seven West is a speculative buy for those patient enough to wait for an advertising recovery.

The Herald Sun accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser.