SRG to discontinue Amart Sports

Rebel sportSuper Retail Group has decided to discontinue the Amart Sports and convert its 65 stores into Rebel Sport as part of a consolidation strategy designed to defend against the entry of Amazon, Decathlon and JD Sports.

The plan, which is due to be completed by the end of October, will incur a non-cash transformation cost of $34 million in FY17 accounts, as well $9 million in capital investment for store fit outs and a further $3 million in cash costs to be incurred in FY18.

In return, the merger is expected to generate an annualised $15 million in margin uplift and synergy benefits after two years, positioning the group to invest more heavily in Rebel’s offering, which will now trade across almost 160 stores nationwide.

The group said in a presentation to investors that increasing customer expectations and an influx in international competitors would make it increasingly difficult to achieve a market leading position with both Rebel and Amart Sports, signalling that a merger would allow Rebel to both expand its range and invest in price to remain competitive.

“Focusing on the Rebel brand will enable us to offer customers an expanded range of solutions and services at more locations, concentrate our investment building world-class omni retail capabilities, and further streamline the end-to-end supply chain required to deliver the seamless omni experience that customers expect,” Super Retail Group CEO Peter Birtles said.

In recent months, the sports retailing landscape has seen increasing competition, with the likes of French retailer Decathlon and the UK’s JD Sports ramping up their Aussie footprint.

SRG last month unveiled its omnichannel vision for the automotive brand Supercheap Auto and has now bedded down a strategy for its sporting division after conducting a review into the brands.

It comes amid the construction of French discount sporting giant Decathlon’s first big-box location in Sydney’s inner west, which is due to open in October and will be the first of a 100 store vision for the company Down Under.

SRG indicated that Amart Sports’ value proposition, which is also based on low-cost high-volume trade in big-box stores, will be incorporated into the Rebel brand.

British brand JD Sports, which competes more directly with Rebel’s current brand-based offer, now also has three stores in Australia, after complementing its Melbourne flagship with locations on the Gold Coast and in western Sydney.

The company said that the presence of new competitors on both sides of the sporting goods market would ultimately undermine the position of Amart Sports, as Rebel will be required to “adopt a stronger value message” to remain competitive, reducing the “differential in the overall customer proposition” between the companies.

“Our research has confirmed there is a high degree of overlap between Rebel and Amart Sports customers, with the choice between brands typically only a question of which store has the most convenient location.

“There is also significant product range overlap between the brands, so this decision will also drive synergies from a customer service perspective,” SRG said in a statement.

The transformation will incorporate four distinct store formats for Rebel that align to metro, suburban and regional customer demographics to localise and adjust its offer for Amart’s large format stores.

SRG remains confident that the diverse formats and assortments can be managed through adequate merchandising systems, with a plan in place to enhance ranging processes over the next three years.

Amart Sports’ team members will be transferred to newly converted Rebel stores as the transition is implemented.

SRG also said that it expects to come in at the upper end of its previous EBIT guidance of 16 to 18 per cent above the prior corresponding period.

 

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