Birtles details spending plans
It’s been a good morning for Super Retail Group CEO Peter Birtles, who has managed to inspire confidence in the skittish retail market after reporting EBIT growth across the breadth of the company’s operations for the year ended 30 June
Shares were up 9.5 per cent in early Friday trading, reversing a trend that had seen its value drop more than 25 per cent since January on fears about the impact of Amazon’s arrival on its business.
Speaking to Inside Retail on Friday morning, Birtles said he believes the group is positioned well to succeed in FY18, as management looks towards incremental improvement in its strong-performing operations and broader investment in the leisure business.
“We’re feeling positive about our prospects, because we’ve got good trading momentum, but we’ve also got the benefits of the work that we’re doing on transforming the business,” he said.
Birtles has been playing down concerns for months, but has now decided to up the tempo on the company’s investment in future proofing the business, outlining around $120 million in planned capital expenditure in FY18, bringing two-year transformation costs above the $200 million mark.
Stores across its numerous brands, including Rebel, BCF, Rays and Supercheap Auto, will all be getting love, with almost $70 million to be spent on openings and refurbishments, including rolling-out learnings from its Penrith SCA flagship to the broader auto network.
Around $50 million will be spent on digital in FY18, encompassing IT infrastructure and a re-platforming of all websites across the group, which is already underway.
Additional resources have also been set aside to fund the sport division transformation, which was announced several months ago and will see Amart Sports merged into Rebel.
Birtles is betting that the investment will place the group to compete amid a weakening consumer back-drop and increasing competitive pressures across all three of its divisions.
“Yes, we anticipate more competition, [and] yes we anticipate some price pressures in market, but we’re positioned to respond to that,” he said.
“It’s one of these markets where customers are being careful with their spending, there’s clearly cost of living pressures that mean people are being careful, but that doesn’t mean that you can’t still win with good value.
“We’ll continue to come at the market with good value, but there’s also those product launches – I think that’s important.
“It becomes a market share game, you have to be focused on winning share and there’s definitely opportunities there,” he continued.
Changes to come for leisure division
Rays, which has been undertaking a turnaround strategy, well short of foot-traffic expectations again in FY17, with a decision to be made before the end of FY18 on whether the business will continue.
A re-think about the position of the store portfolio and how well it reflects the new adventure focused brand proposition management has created.
“Once we get people in the business it’s working well, but we just haven’t got the traffic,” Birtles said.
“There is a distinction, metro stores are performing much stronger than outer-suburban and regional stores.
“The re-positioning of the business, which is [geared towards] that adventure customer, is for a person that’s a little bit more aspirational … the reality is that the demographics associated with that are a bit more metro-based.”
Birtles also said there’s work to be done in Ray’s consumer perceptions, with Melbourne-based research revealing that many customers don’t understand that the brand has changed from the now-dumped Ray’s Outdoor offering.
The other side of the retail division, BCF, is performing better, booking like-for-like sales growth of 5.1 per cent for the year on what Birtles said was better execution and the success of its new branding strategy.
However, softer performance in the boating category will drive a shift in product-mix during FY18, with less space advocated to boating goods and more allocated to camping, apparel, 4WD and caravan products.
Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.
Contributor Jared Dickson says a quick recovery is hard to believe, and two of the major retailers that will be und… https://t.co/4HF50kFARv19 hours ago
Sarah & Sebastian's flagship store in Mosman, Sydney, looks more like a museum than your average jewellery shop. Ta… https://t.co/xQCMQlhrYL23 hours ago