The Australian company, RCG Corporation has been awarded the Australian rights to distribute the Merrell brand of outdoor, comfort, active lifestyle, performance footwear and apparel under an agreement with Wolverine World Wide, Inc., the owner of Merrell. The agreement is effective from 1 January, 2010.


RCG anticipates that the Merrell business will produce in excess of A$12 million in its first year of operation and, based on the profiles of similar distribution businesses, it is expected to deliver an EBIT contribution in excess of 20%. Given the January commencement date and the costs of establishing this business, RCG is not expecting the business to contribute to earnings until FY11.


Chairman of RCG Corporation, Mr Ivan Hammerschlag, said, “RCG will be setting up a wholesale division, operating independently of its retail division, to maximize distribution to the many department store, specialty retail and outdoor retailers already carrying the Merrell brand as well as to new prospective customers. We believe that there are significant expansion opportunities associated with Merrell, which will have a substantial impact on the future profitability of RCG.


“The Merrell business will be highly complementary to the growth strategy associated with the increased product range in the new large format TAF stores and the Shoe Superstore business. In addition, RCG also intends to rollout a number of Merrell flagship stores over the next three to four years.”


He added, “This is a significant and exciting step for RCG. The Merrell brand is known worldwide as a quality performance and outdoor brand, making it highly complementary with our strategy of acquiring distribution and retail businesses in the sports, fitness, footwear and active lifestyle space and we are delighted to commence this relationship with Wolverine World Wide, Inc.”

RCG also licenses The Athlete's Foot franchise for Australia.

 

In its most recent quarter, RCG Corporation reported consolidated RCG revenues, including the royalties from the TAF stores, declined 7.1% to A$22 million ($16 mm).  Net income after taxes rose 7.5% to A$5.3 million ($4 mm). Consolidated net profit before tax of A$7.61 million ($6 mm), an increase of 27% on the previous financial year's net profit of A$5.97 million ($5 mm).

 

Profits grew on the back of what was called an exceptional sales performance of The Athlete's Foot network, which recorded total sales growth of 15% to A$166.7 million ($125 mm) and like-for-like stores sales growth of 11%.

 
The company said it benefited from both the sales and profit growth and this, together with the company's strong balance sheet, allowed the directors to lift the moratorium on dividend payments and declare a fully franked special dividend of A2.2 cents per share and a fully franked ordinary dividend of A1.5 cents per share for a total of A3.7 cents per share.