SUL: Bricks & mortar isn't dead

Research evidence excerpt

SUL: Bricks & mortar isn't dead

riced as of prior trading day's market close, EST (unless otherwise noted).

and new brands to the existing range, allowing SCA to better serve 4WD,

enthusiast and EV consumers. SCA plans to add 80 Gen 5 stores by 2031

to arrive at a total store count of ~415 (RBCe 406). For rebel, SUL has

historically targeted catchments with >50k population densities, but now

sees the next opportunity in regional catchments with a population of ~10k

to ~50k. According to SUL, regional stores currently have 200bps higher

contribution margins than the network average and are underpenetrated

by rebel. 50+ regional towns have been identified as suitable for a smaller

regional format with 30 prioritised for delivery by FY31. SCA is targeting

205 stores for rebel by FY31 vs RBCe 201. BCF is targeting 190-200

stores (RBCe 191), but floor space will rise more as the store format mix

moves towards superstore (3,300-4,000sqm) and large (2,200-2,750sqm)

formats vs today's network ~95% geared towards fleet (1,200-1,750sqm)

and small (<1,000sqm) formats. Our previous lower store count forecasts

were predicated on the view that SUL's sales mix would continue to shift

online over time. While we still believe this, SUL's banners (particularly SCA

and BCF) and omnichannel strategy necessitate a sizeable store network.

Decreasing FY27 group EBIT forecasts by -8.7%, driven primarily by Ignite

corporate costs and D&A from higher capex. The additional floor space

from higher store counts and larger format stores drives higher capex

forecasts - we now forecast $165m/$172m in FY27/FY28 respectively. Our

corporate cost forecasts also rise by ~2x in FY27/FY28 to RBCe $60m in both

years, driven by Ignite, but this should deliver $75m in annual cost savings

by FY29. Outperform.