Super Retail’s (ASX:SUL) sales momentum is grinding to a halt as shoppers tighten their belts. Rising inflation and cash rates are cutting into household budgets and weighing on consumer sentiment.

Why it matters: Shoppers are scaling back. Over March and April 2026, we estimate group sales fell 1% year on year. This is in stark contrast to the 5% sales growth it had still achieved over January and February 2026. We trim our fiscal 2026 sales growth estimate to 3%, from 4% prior.

  • At Supercheap, demand for discretionary items like power tools is weakening significantly. At Rebel, sales growth is soft but relatively resilient to the fuel price shock. In both the auto parts and sporting goods markets, Super Retail is gaining share, boding well for an eventual recovery.
  • Looking past the spike in fuel prices, we think Super Retail’s earnings power is intact. We expect most fuel-related inflation to abate once oil supply normalizes. And while money markets expect more rate hikes this year, the RBA’s current restrictive setting is likely to unwind over time.

The bottom line: Our $14 fair value estimate for narrow-moat Super Retail stands. Lower sales and rising costs reduce our fiscal 2026 EPS estimate by 6%. But our longer-term forecast is largely unchanged, including a recovery in margins. Shares are cheap.

  • We think the market anticipates profit margins to shrink further from already depressed levels. We would need to assume EBIT margins stay around 7%. This compares with last year’s 10%, and our fiscal 2026 estimate of 8%.
  • We expect the margin to expand in fiscal 2027, as ramp-up costs for its new warehouse cease, and sentiment and sales bounce back with lower fuel prices. We estimate the margin to expand by 90 basis points to 9%. However, we expect competition to hinder further margin expansion.

Between the lines: We expect sales growth to accelerate to 4% in fiscal 2027, and expect this to be kept over the next decade, underpinned by rising household incomes.

Super Retail slightly underperforming industry growth despite discounting more

Super Retail Group operates in Australia and New Zealand, selling automotive parts and accessories, sporting goods, and outdoor leisure equipment. The group is the market leader in all three segments in Australia, with about 20%-30% share in auto parts, camping equipment, and sporting goods retailing. However, we believe formidable competition will constrain operating margins as the firm competes on price to maintain market share.

While also facing competition from the brick-and-mortar channel, e-commerce is growing in importance as consumers increasingly shop online. Here, Super Retail competes with existing omnichannel retailers and online pure plays—including the largest domestic operator, Amazon.

However, about half of group earnings are from its auto parts retailing segment, which is relatively sheltered from online competition. Supercheap Auto only ships a low-single-digit portion of its total sales, with the rest picked up in-store. This speaks to consumers’ immediacy of the need for auto parts.

The sporting and leisure goods segments—together accounting for about half of group operating earnings—are more challenged by the structural shifts to online. With an increasing share of e-commerce, we expect competition to remain intense in those two categories, resulting in price cuts, pressure on profit margins, and greater investment needs in digital channels and in-store service.

Super Retail has some 340 stores in the Supercheap Auto chain; about 250 stores in outdoor retailing across both the BCF and Macpac brands; and some 160 sports stores under the Rebel brand. These large store networks facilitate click-and-collect distribution, and increasing private-label sales is a competitive advantage. Supercheap Auto offers in-store services that further differentiate it from online pure plays, although it is easily replicated by incumbent auto-parts competitors Autobarn and Repco.

Bulls Say

  • The group boasts an impressive management team, evidenced in continuous working capital improvements and cost efficiencies.
  • Relatively large scale helps the firm consolidate its market share in the brick-and-mortar channel when competition is intense and smaller competitors are exiting.
  • The large store network, facilitating click-and-collect distribution, and increasing private-label sales are advantages. Yet, ongoing strong growth in its online channel could require a rationalization of the network longer term.

Bears Say

  • The core business in automotive has limited growth opportunities. Increasing complexity of cars means motorists could be less inclined to maintain their own vehicles, weighing on sales for the Supercheap Auto division.
  • Rebel is facing intense competition. Increasing competition from online and traditional channels is expected to put downward pressure on operating margins.
  • Many of Super Retail’s product categories are discretionary, and consumers are likely to reduce spending in an economic downcycle.

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