Should I buy Super Retail shares following Monday's stellar update?

Is this a retail share to buy right now?

| More on:
a young woman looks happily at her phone in one hand with a selection of shopping bags in her other hand.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Super Retail Group Ltd (ASX: SUL) shares have been strong performers this week.

Investors have been scrambling to buy the retailer's shares thanks to the release of a strong trading update.

That update revealed that Super Retail expects to report an 11% increase in like for like sales during the first half, taking its revenue to $1.96 billion. This is expected to underpin normalised profit before tax of $212 million and $218 million, which will mean a big improvement in its margins despite inflationary pressures hitting many retailers.

Is it too late to buy Super Retail shares?

The good news is that a couple of leading brokers believe Super Retail shares can keep rising from here.

According to a note out of Goldman Sachs, its analysts have reiterated their buy rating with an improved price target of $14.20.

Based on where its shares are currently trading, this implies potential upside of 16%. Goldman commented:

SUL is our preferred pick in discretionary apparel/footwear space given outdoor/functional category resilience as well as the company's focus on driving consumer experience via loyalty (~70% of sales) and unique omni-channel experience. Our valuation methodology and multiples are unchanged. SUL trades at 12mths fwd P/E of 13.2x vs our new TP implied P/E of 15.2x. Reiterate Buy.

Who else is bullish?

Over at Morgans, its analysts also responded positively to Super Retail's update by retaining their add rating and increasing their price target to $14.00.

This suggests that Super Retail shares could rise approximately 15% from current levels.

While the broker suspects that this could be as good as it gets for the company, it remains positive due to its attractive valuation. Morgans explained:

Is this as good as it gets for SUL? We expect LFL sales to turn negative from this point (including in the month of January) and we continue to see next year (FY24) as a down year both in terms of sales and margins. We are keeping SUL on an ADD rating, however, as multiples remain attractive and to reflect the possibility of further positive earnings surprises and maybe even capital management by way of a special dividend. Our target price increases from $13 to $14.

Finally, both brokers are expecting a fully franked dividend yield of approximately 5.1% in FY 2023, making the total potential returns even sweeter.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

A block of cheese with grated cheese on top.
Consumer Staples & Discretionary Shares

Macquarie expects 20% upside for this ASX All Ords consumer staples stock

This week, Macquarie initiated coverage on Bega Cheese with an outperform rating.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Consumer Staples & Discretionary Shares

Why are Cettire shares crashing 27% today?

Things aren't looking good for this online luxury products retailer.

Read more »

Young lady in JB Hi-Fi electronics store checking out laptops for sale
Consumer Staples & Discretionary Shares

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Here’s what this broker has to say about these consumer discretionary companies. 

Read more »

Happy couple doing grocery shopping together.
Consumer Staples & Discretionary Shares

What does Macquarie think Woolworths and Coles shares are worth?

Should investors be interested in supermarket stocks?

Read more »

A man looking at his laptop and thinking.
Broker Notes

Up 17% in 2025, how much more upside does Macquarie tip for Metcash shares?

Following Tuesday’s merger and earnings news, Macquarie changed its rating for Metcash shares.

Read more »

Woman calculating dividends on calculator and working on a laptop.
Consumer Staples & Discretionary Shares

$10,000 invested in these consumer discretionary shares 5 years ago is now worth…

These ASX 200 companies have given investors big returns.

Read more »

Couple looking very happy while shopping at a home improvement store.
Dividend Investing

Focused on pasive income? Check out this defensive ASX 200 dividend stock

A leading expert says this quality ASX 200 dividend stock remains ‘undervalued’.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Consumer Staples & Discretionary Shares

Guess which ASX 200 share is pushing higher on guidance update

This wholesaler is expecting earnings ahead of consensus estimates in FY 2025.

Read more »