Super Retail Group reported a decline in FY26 EBIT of 3%, but gross margin improvement combined with tight cost control bodes well for EBIT growth in FY27e. We forecast EBIT growth of 6% for the year ahead, with higher gross margins the key driver. Rebel is improving its inventory and promotional management and the higher Australian dollar will lower the cost of goods. While we see an improvement in EBIT, the economic backdrop will be a headwind.

The key planks of Super Retail Group’s strategy are increasing both store count and store sizes, expanding the range of products and streamlining its operations and supply chain. The surprising element is the pace of store growth, which is well ahead of population growth and at-odds with likely migration towards online across its categories. The company will need to take market share to be successful and should do so.

Super Retail Group’s FY25 result revealed an encouraging reversal of fortunes in the second-half. While 1H25 EBIT fell 7%, 2H25 EBIT rose 9%. The better gross margin and lower cost growth in 2H25 are likely to support earnings in FY26e. While margins are better, sales trends remain volatile and we only forecast 2% EBIT growth in FY26e. There will be a drag from higher overhead costs. While margins are improving, the sales backdrop is unlikely to accelerate much making it difficult to accelerate earnings growth.

Super Retail Group reported 1H25 sales up 4%, but EBIT down 7%. The typically resilient Supercheap Auto division had a 6% decline in EBIT. The increasingly competitive sales backdrop for Auto makes it challenging to see much earnings recovery over the next 18 months. Elevated competition will continue to be a headwind in Supercheap Auto and we expect flat like-for-like sales for 2H25e and FY26e. Elsewhere, sales trends are improving and mid single-digit sales growth is likely for Rebel, BCF and Macpac in 2H25e.