Lacklustre growth depicted in recent retail sales’ data seems to be impacting many ASX-listed retail stocks. While Amazon’s entry in Australia is having a gradual impact on domestic retailers, few with the capability to undergo digital transformation with strong fundamentals still hold the key to growth and manage tough competition.

Super Retail Group Limited

SUL Details
Digital Channel to support growth: Up 2.7% on March 08, 2018, Super Retail Group Limited (ASX: SUL) is an Australian-based company that operates a portfolio of retail brands and its results for the six months ending on 31 December 2017 depicted year on year sales growth of 2.2% to $1,324.1 Mn as compared to $1,296.6 Mn in 1HFY17. Gross margin in 1HFY18 increased by 30bps as the group reflected transformation and supply chain initiatives.
 

Market Outlook (Source: Company Reports)
 
Net Profit after tax (NPAT) for the period attributable to the company was $72.2 Mn in 1HFY18 vs $74.4 Mn in 1HFY17, down by 3%. Group costs were slightly up to $10.2 million during the half and included corporate costs, unutilised storage space and investment in the Group’s digital initiatives. On segmental front, Auto Retailing and Sports Retailing segments delivered 3.9% and 1.6% EBIT growth, respectively, whereas leisure segment EBIT of $4.2 Mn was lower than prior comparative period. The management expects that the digital channel would be the growth catalyst rather than traditional physical channels in future. The Group is planning to open approximately five new stores, while four stores have been closed and seven stores have been refurbished. SUL is also integrating the RebelFit eight standalone stores in the second half. SUL updated about acquiring New Zealand outdoor equipment brand Macpac and this is expected to be mid-single digit EPS accretive in FY 2019. In addition to this, Rays and Macpac are to be consolidated under the Macpac brand. Meanwhile, SUL stock has fallen 17.09% in six months; and based on the group’s efforts to sustain in a competitive environment, we give a “Hold” recommendation on the stock at the current price of $6.78
 

SUL Daily Chart (Source: Thomson Reuters)
 

BWX Limited

BWX Details
Healthy Performance: BWX Limited (ASX: BWX) is a vertically integrated developer, manufacturer, distributor and marketer of branded skin and hair care products in beauty and personal care market. Group’s revenue during 1HFY18 was recorded at $67.2 Mn against $37.2 Mn in 1HFY17, marking a growth of 79.2% YoY on the back of product mix growth in domestic and international market. Gross profit was recorded at $40 Mn in 1HFY18, up 63.9% from $24.4 Mn in 1HFY17. Normalised EBITDA came at $17.5 Mn in first half of the year from $12.8 Mn in 1HFY17. Normalised NPAT for the first half of the year amounted to $10.7 Mn from $8.2 Mn in 1HFY17, up by 30.5% Year-on-Year (YoY). The company focusses to implement long term strategy for the markets such as the UK, China, Canada and New Zealand, along with increasing footprint in new markets such as India where Sukin branded products have now been registered.
 

 
1HFY18 Financial Highlights (Source: Company Reports)
 
Moreover, the acquisition of Andalou Naturals, in combination with Mineral Fusion is expected to provide significant advantage to expand company’s brands i.e., Sukin and other brands in US market. Though acquisitions including the above and Nourished Life, etc. have raised some concerns regarding costs, the same are expected to increase BWX overall growth. While many investors including Bennelong Funds Management Group Pty Ltd have ceased to be a substantial holder of BWX, the directors of the company have increased their holding through on-market purchase of shares. In consideration of aforesaid facts, and assuming no change in market conditions or corporate activity, the company’s guidance on EBITDA has been given in the range of $42 Mn to $46 Mn for FY18, up by 60% to 74% as compared to FY17. We give “Hold” recommendation on the stock at the current price of $5.19
 

BWX Daily Chart (Source: Thomson Reuters)
 

Australian Pharmaceutical Industries Limited

API Details
Some headwinds for sales: Up 2.9% on March 08, 2018, Australian Pharmaceutical Industries Limited (ASX: API) is gaining some traction lately. The group has earlier announced about issuance of performance rights under API long term incentive plan for 2016-2019 and 2017-2020. There are maximum 587,747 number of securities to be issued. Moreover, the directors of the company have increased their stakes through on-market trade. The company expects its half year 2018 net profit after tax (NPAT) to be approximately $26.5 million. However, the company expects that its full year NPAT to be marginally above that of FY17.
 

Sustained Performance Over 3 Years (Source: Company Reports)
 
The overall network sales, including dispensary, for the financial year to date is up 2% but the like-for-like front-of-store sales in its network had fallen for the period. In addition to this, the dividend payment for the first half is expected to be in line with the prior corresponding period. API has confirmed that its balance sheet and cash flow position still remain solid. While API stock has risen 5.48% in six months as on March 7, 2018, the headwinds prevail to a certain level, and hence, we give a “Hold” recommendation on the stock at the current price of $1.585
 

API Daily Chart (Source: Thomson Reuters)
 

Myer Holdings Limited

MYR Details

Stock price getting some lift lately: Myer Holdings Limited’s (ASX: MYR) stock surged up by 4.6% on March 08, 2018, while the group is looking for a new CEO and MD post the announcement that CEO and MD, Richard Umbers, has stepped down from his role and Chairman Garry Hounsell has been appointed as Executive Chairman. Myer Holdings otherwise has been smashed by investors while the group had announced a second quarter trading update reporting a deterioration in trading during the start of the second quarter following a subdued performance during the first quarter. Total sales to the end of November were down 2.3% and comparable store sales were down 1.8%, compared to the pcp. Given the trading conditions, MYR had flagged that 1H 2018 NPAT, pre-implementation costs and individually items, will be materially below the pcp, anticipating 1H 2018 NPAT to be between $37m and $41m pre-implementation costs and individually items. However, the speculation of takeover proposal being lined up for the retailer, keeps on boosting the stock movement intermittently. We have a “Hold” recommendation on the stock at the current price of $0.455
 

MYR Daily Chart (Source: Thomson Reuters)
 

Woolworths Group Limited

WOW Details

Stepping up investments in digital platform: Woolworths Group is able to enhance its market share lately with a boost coming in from the latest encouraging 2018 half year results that entailed sales from continuing operations rising up by 3.8% to $29,807m. Further, a growth of 4.9% and 4.8%, respectively, was witnessed for Australian Food and Endeavour Drinks while all businesses reported positive sales growth during the half. The Gross profit from continuing operations as a percentage of sales also increased 31 bps on the prior year to 29.3% driven primarily by change in business mix and the improvement in stock loss in Australian Food. EBIT from continuing operations was up 9.9% and net financing costs decreased 26.6% due to lower average debt. While the group was disappointed by the ACCC decision of not approving the proposed acquisition of its retail fuel business by BP, WOW has been firing on its other cylinders with focus on digital platform to have an improved performance in the coming period. Given the capability of showcasing expanding margins and growing profits and stepped up investments in data analytics and digital technology for enhanced customer experience and better sales, we give a “Buy” on the stock at the current price of $26.81
 

WOW Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.