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Why the Super Retail share price dropped 7% lower today

James Mickleboro
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The S&P/ASX 200 index may be racing higher again on Thursday, but not all shares on the index are faring as well.

The worst performer on the benchmark index today has been the Super Retail Group Ltd (ASX: SUL) share price.

The retail group’s shares were down as much as 7% to $9.66 in early trade. They have since recovered slightly, but are still down 5% to $9.88 at the time of writing.

Why is the Super Retail share price sinking lower?

Investors have been selling Super Retail’s shares after it was the subject of a broker note out of Ord Minnett this morning.

According to the note, Ord Minnett has downgraded the retailer’s shares to a hold rating with a $10.00 price target.

The broker made the move amid concerns that Super Retail could be the next retailer to be negatively impacted by the devastating bushfires.

This follows an update by Mosaic Brands Ltd (ASX: MOZ) earlier this week warning that its sales tumbled during the latter part of the year due to the bushfires. Approximately 20% of its stores have been directly impacted by the fires. And almost one-third of its total 1,386 stores are located in regional areas, where consumer confidence has been particularly fragile.

Why will Super Retail be impacted?

Ord Minnett is concerned by the company’s exposure to the outdoor and camping markets with its BCF and Macpac businesses. It suspects that the bushfires could have hurt the sales of these businesses. As a result, it believes there is downside risk to sales estimates in FY 2020.

In addition to this, the broker notes that its shares have rallied strongly over the last 12 months. Prior to today, Super Retail’s shares were up almost 57% since this time last year. This means it lacks the valuation support to justify maintaining a more positive view.

Also receiving a downgrade by Ord Minnett today was Beach Energy Ltd (ASX: BPT). It has downgraded the energy producer’s shares to hold with a $2.65 price target. It made the move on valuation grounds.

The post Why the Super Retail share price dropped 7% lower today appeared first on Motley Fool Australia.

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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 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020