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.

Super Retail Group’s trading update for the first 16 weeks highlights a slight softening of sales trends and some increased pressure on gross profit margins. The increased competition in the auto market is of note given Supercheap Auto accounts for over half the group’s earnings and close to two-thirds of valuation. Repco is becoming more competitive in retail and Bunnings will expand in auto in the next six months. 

Super Retail Group reported EBIT down 3% in 1H24 with cost growth ahead of sales growth. Super Retail Group’s trading update was soft, but its sales trends are unlikely to deteriorate from here. The challenge is operating cost growth of 6.5% is the base case for 2H24e with sales growth of only 1.2%. Wage and rent cost growth will remain elevated.