RCG Corporation, owner of The Athlete’s Foot shoe chain, will use three-hour delivery as a drawcard for its online operations to combat the presence of Amazon and amid weak consumer spending.
The shoe retailer, which is also distributor of a string of footwear brands including Vans, Platypus, Merrell and Dr Martens, impressed investors on Monday with earnings at the top of its guidance.
The group’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $78.3 million for the year to July 2 was up 30 per cent on the prior year, while its underlying profit rose 21 per cent to $39.9 million.
RCG had downgraded its earnings guidance twice, first in February and then in May from an initial target of $90 million down to $74 million to $80 million.
Co-chief executive Hilton Brett said a decline in consumer spending had hurt sales, particularly during the key December and January trading period.
“We are pleased with the result but we certainly did not achieve what we set out to achieve at the beginning of the financial year,” Mr Brett told AAP.
“Over the last five years there have been basically no wage growth and now we are starting to see employment numbers improve and there are some signs of wage growth.”
However, he said rising power prices and interest rates are still holding back spending and RCG is focusing on digital strategy to boost sales, beat competitors and grow market share.
“We have been working on our digital strategy long before Amazon confirmed it was coming to Australia,” Mr Brett said.
Mr Brett said RCG, which has 430 stores across Australia and New Zealand, plans to launch three-hour delivery to most population centres this financial year, and to roll out more click-and-collect centres.
The rollout of 50 new stores and the August, 2016 acquisition of hip sneaker business Hype DC a year ago helped the strong underlying profit.
However, the group’s $29.2 million statutory net profit was down 2.6 per cent on the prior year after accounting for acquisition-related costs.
The group’s Accent business, which includes Platypus, Skechers, Vans and Timberland, delivered $67.1 million of underlying earnings, up 57 per cent on the prior year.
Earnings for The Athlete’s Foot fell eight per cent to $12.6 million as sales growth slowed while EBITDA in RCG Brands – which includes Merrell, CAT and Saucony – fell 62 per cent to $3 million.
Analysts from investment bank Citi said RCG’s like-for-like sales growth of one per cent during the first seven weeks of the current financial year was weaker than the 2.6 per cent growth it had a year ago.
RCG shares closed five cents higher – a 6.3 per cent gain – at 84 cents.
RCG CAPITAL HEADLINE RESULTS:
* Full-year net profit down 2.6pct to $29.2 million
* Underlying net profit up to 21pct to $39.9 million
* Revenue up 43.7pct to $636.15 million
* Final dividend of three cents a share, fully franked, up from 2.5 cents