Here’s why the Super Retail (ASX:SUL) share price is zooming higher today

The Super Retail Group Ltd (ASX: SUL) share price has been a strong performer on Wednesday.

In afternoon trade the retail company’s shares are up 6% to $11.83.

Why is the Super Retail share price racing higher?

Investors have been fighting to get hold of the company’s shares today following the release of a very positive trading update this morning.

According to the release, Super Retail has started FY 2021 in sensational form and recorded strong sales growth across the majority of its brands.

For the first 17 weeks of FY 2021, the company has delivered 25% growth in both total and like-for-like sales. This is despite the impact of COVID-19 restrictions, which include lockdowns in Melbourne and Auckland.

Management advised that it has maintained strong momentum in its digital channels, with online sales growth of 132% and Click & Collect sales growth of 123%. The latter represents 44% of year to date total online sales.

Pleasingly, the company has also experienced a widening of its gross margin thanks partly to the benefits of reduced promotional activity. Management advised that its gross margin was 200 basis points higher than the prior corresponding period.

How are its brands performing?

The Supercheap Auto business continues to perform very strongly, reporting 22% growth in sales and 21% growth in like-for-like sales. It also reported a 132% increase in online sales during the period.

The Rebel business reported a 16% increase in both total and like-for-like sales during the 17 weeks. This was supported by a sizeable 184% lift in online sales.

Another very strong performer was the BCF business. It delivered a whopping 63% increase in sales over the period. This was driven by a 61% increase in like-for-like sales and a 140% jump in online sales.

Finally, the struggling Macpac business significantly underperformed, with a 2% decline in sales. This was despite the business recording a 121% lift in online sales.

Super Retail’s Managing Director and Chief Executive Officer, Anthony Heraghty, commented: “We are pleased with the positive start to the financial year. We are continuing to see robust growth in both in-store and online sales and our active club membership base has increased to over 6.85 million members.”

“Our considered approach to promotional activity in response to strong levels of consumer demand – to help manage inventory in the leadup to Christmas and optimise gross margin – and the substantial fixed component of our cost base means that revenue growth has flowed meaningfully through to the bottom line.”

Outlook.

Given the uncertain environment, no guidance has been provided for the first half or full year. Nor does it believe that its year-to-date performance should be treated as an indicator of full year performance.

However, management appears cautiously optimistic on the future.

Mr Heraghty said: “As Australia and New Zealand begin to re-open, we are looking forward to inspiring our customers to live their passion as they look to get outdoors, be more active and enjoy the summer holiday season.”

“The Group’s four core brands operate in attractive lifestyle categories and are well positioned to benefit from increased demand for domestic tourism and leisure as well as the acceleration of the health and wellbeing trend,” he concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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