r the single banner to almost 160 stores. The decision to streamline the division will reduce costs for SRG, generating savings in supply chain, marketing and management. CEO Peter Birtles has also indicated the conversion of the Amart stores will improve productivity in the rebranded outlets through new and extended ranges that some suppliers have previously only offered in Rebel stores. While the sports division has achieved reasonable growth and contributed positively to SRG’s earnings, Rebel has always been the stronger brand with better customer recognition and a more defined market positioning. And while it may not have been part of the reasoning for the abandonment of the Amart brand, there has been a blurring of the sports brand with the Super Amart furniture chain. Rebel has been positioned as a specialist in sporting goods and apparel, while Amart has essentially been a more promotion-driven generalist, a positioning that is potentially more vulnerable to new competitors in the market and the reason suppliers were less enthusiastic about having some of their brands in Amart stores. Birtles recently told Inside Retail that Amart customer focus groups had told the retailer they wanted to see more top-end product in the stores, and they were frustrated they couldn’t get access to better merchandise options. The groups told the retailer they were looking for a better value proposition and there was an awareness of the Amazon and Decathlon market entries providing a competitive option. The review of the sports division by SRG was a proactive move to ensure the retailer secured its market leadership in sporting goods and apparel retailing. A race to the top While SRG has had some challenges with its Goldcross Cycles and Workout World acquisitions, the purchase of the Rebel and Amart chains from Archer Capital in 2011 ranks as one of the most successful acquisitions from a private equity vendor. In FY16, the sports division increased sales by nine per cent to $910.2 million and posted an 18.6 per cent lift in earnings before interest and tax (EBIT) to $77.8 million. The division reported continued solid growth in the first six months of the current financial year, with an 8.5 per cent boost in revenue to $490.5 million and a 19.5 per cent increase in EBIT to $50.9 million for the six month period. Like-for-like sales growth was six per cent, driven by increases in both transaction and average transaction value growth and particularly strong sales momentum in the apparel category. Full financial year results for 2017 to be released on 25 August are expected to continue healthy returns and maintain solid gross margin gains in the past year and reduced operating costs as a percentage of sale due to ongoing efficiency measures. Best of both worlds In a statement issued to the Australian Stock Exchange, Birtles said the move will combine the best of both brands into one single customer-focused offering that brings together Rebel’s strengths in solutions and services with Amart Sports’ customer service excellence. “As a brand, Rebel, with its ongoing focus on engaging both the casual enthusiast and serious competitor with the full range of solutions and services they need to live their sporting passions, is a strong fit with the group’s long-term strategic focus and winning competitive advantages, ” Birtles said. He said the conversion of the Amart stores to focus on the single banner would sustain and strengthen the competitive position of the sports retailing division in “a changing customer and market landscape”. The sporting goods and apparel category is considered vulnerable to online competition and especially the formidable Amazon retail offer. However, SRG is just as wary of the recent international retailers that have entered the market. Decathlon and JD Sports, along with the online challenge of the biggest British retailer in the category, Sports Direct, are increasing competition in a category that is already fiercely competitive with apparel chains such as Lorna Jane, Lululemon and Sportsco, as well as adventure retailers, such as Anaconda and Kathmandu significant local competitors. Rebel currently has an edge in licensed Australian sports apparel for football, soccer and cricket, but the new market entrants can take the cream from licensed sports apparel for the English Premier League and the NBL and NBA teams in the United States. Omnichannel for the win Birtles said bringing Rebel and Amart together will enable the sports division to “further accelerate the shift it has made in recent years towards a concentrated focus on delivering solutions and service options customers are seeking in sport and fitness. “Focusing on the Rebel brand will enable us to offer customers an expanded range of solutions and services at more locations, concentrate our investment on building world-class omnichannel retail capabilities, and further streamline the end-to-end supply chain required to deliver the seamless omni experience that customers expect,” Birtle said. The omnichannel investment is one of the key strategies to blunt the challenge of Amazon and other international and local competitors in the category but is not simply a defensive ploy. In the first half of the current financial year, the sports division’s digital sales increased by 73 per cent over the comparative six months in FY16. Birtles expects the conversion of the Amart stores to Rebel will deliver gross margin uplift arising from range optimisation and reduction of underperforming categories and synergy benefits in marketing and administration. Birtles estimates the benefits are expected to reach an annualised amount of around $15 million after two years and will provide capacity for reinvestment in building the Rebel business and in sustaining a competitive offer as market dynamics change. The one-off after tax non-cash costs associated with this transformation are expected to be in the range of $34 million with the capital investment in fitting out the converted stores budgeted at $9 million. A nip and tuck As SRG moves proactively to fortify its well-performed sports division against future challenges, the company continues to struggle to strike a balance in its leisure retail division and to improve the profitability of the Rays Outdoor chain. The half year results indicated a new format developed for the Rays stores is showing some promise, although the retailer conceded in its report to the Australian Stock Exchange that the overall comparative performance continued to be impacted by changes to product mix and clearance activity. The new format stores are apparently attracting higher numbers of target customers and generating higher transaction levels both in-store and online. Following an exhaustive review, SRG has restructured its leisure division, axing its Fishing Camping Outdoors chain in New Zealand and closing 20 Rays Outdoors stores, while converting a further 11 to its BCF (Boating Camping Fishing) chain. Six Rays Outdoors stores were also converted, either to Super Cheap Auto locations or Amart stores that will now be rebranded to Rebel. The success of the surgery in the Rays chain, which now has just 17 stores, should be evident in the full financial year results next month. The race is on JD Sports currently has three stores trading in Australia at Melbourne Central, Pacific Fair on the Gold Coast and Parramatta in Sydney’s western suburbs. Two further stores will open soon at Miranda in Sydney and Highpoint in Melbourne. The Lancashire-based company has more than 1,200 stores under a portfolio of sports fashion and outdoor brands throughout the United Kingdom and Europe. Decathlon, the French retailer, has established an Australian online sales platform and expects to open its first store in the Sydney suburb of Tempe in October. The retailer has more than 1,000 stores in almost 30 countries and has notionally set a target of 100 stores for the Australian market. Game on!