Super Retail’s shares are edging lower on Monday, despite no specific news.
The post 3 reasons why the Super Retail (ASX:SUL) share price may be down 7% on Monday appeared first on The Motley Fool Australia. –
The Super Retail Group Ltd (ASX: SUL) share price has crept into the red during Monday’s session.
Super Retail shares are now exchanging hands at $12.21, a 4.39% drop into the red. At one point today, the company’s share price hit an intraday low of $11.76, a 7% drop from the open.
Let’s investigate further.
What’s in front of the Super Retail Group share price on Monday?
Although there has been no market-sensitive information released today, Super Retail shares have been on a downturn since the sports and outdoors retailer reported its FY21 earnings on 19 August.
In its report, the company recognised several investment highlights, including:
Sales growth of 22% year on year
Segment EBIT growth of 80% from the year prior to $476 million
Normalised profit before income tax (PBIT) also grew 108% year on year
Net profit after tax (NPAT) of $306 million, up 107% on the year.
Moreover, the company also increased its dividend, bringing the final payment to 88 cents per share – a staggering 450% increase over the year.
Given these notable performance strengths, why is it that the Super Retail Group share price has struggled on Monday?
Well, there are three possible explanations. Firstly, when a company announces a dividend, it will eventually trade “ex-dividend” a short time afterwards. Secondly, the drop could be a result of investor behaviour in selling shares to realise profits. Finally, there’s the ubiquitous variable of possible ongoing COVID-related fears.
Let’s peel back the layers on these a little more.
What does this mean for Super Retail Group shares?
You see, when a company announces a dividend, it also announces a record date. This is the cutoff time in which investors can purchase the company’s shares to qualify for the dividend payment. This is known as the ex-dividend date.
The term “ex-dividend” is also used to describe the date on which a company’s shares begin to trade without the value of the next dividend payment.
Investors must purchase a dividend-paying stock at least one day before the record date, as it takes one day for a trade to settle. However, an important consideration is that the company’s stock price always drops by about the same value as the dividend.
Super’s ex-dividend date is Monday 23 August, which may help explain the downward pressures on the charts today. Thus, on this basis, we can expect a 55 cent decline in the Super Retail Group share price on Monday.
Moreover, investors, for many a reason, will choose to take profits on their investment in a company’s shares.
For instance, investors who are satisfied with their gains in a Super Retail position may opt to take profits to realise their paper gains in cash. Equally, investors may also sell from fear-related decisions.
This results in selling pressure on the Super Retail Group share price. If done in enough volume, the result is significant selling pressure on the charts, fuelling downward moves further into the red.
Given the company’s FY21 performance, plus the uncertainties with coming out of the pandemic – specifically, when retail locations will be allowed to open again – it stands to reason that these selling pressures could be integral in driving Super Retail’s share price lower on Monday.
Super Retail Group share price snapshot
The Super Retail Group share price has posted a year to date return of 15.67%, extending the previous 12 months’ gain of about 15.89%.
Super Retail shares have lagged the S&P/ASX 200 Index (ASX: XJO)’s return of about 25% over the past year.
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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.