RCG Corporation Limited announced a record profit for the year ended July 1, despite some of the most challenging retail conditions in many years. The company reported that earnings per diluted share increased to $3.78 per share, up 3.6 percent over the prior fiscal year, along with revenue and profit growth in both its The Athlete's Foot and wholesale businesses.
RCG lifted consolidated EBITDA 6.8 percent from $12.4 million to $13.2 million, while net profit after tax rose 2.8 percent from $8.9 million to $9.2 million.
The Athlete's Foot (TAF) sales grow despite negative comps
According to data published by the Australian Bureau of Statistics, footwear and accessory retailing contracted by almost 2 percent during the 2012 financial year. Anecdotal industry feedback suggests that the contraction was even more pronounced in the premium athletic space. In this context, The Athlete's Foot has once again delivered an outstanding result. The chain recorded total sales growth of 1.4 percent from $199.4 million to $202.4 million, with comparable store sales down 1.1 percent and EBITDA growth of 3.8 percent to $12.0 million.
Sales strengthened in the second half of the financial year, with comparable growth of 1.2 percent, with the trend continuing in the new financial year. Sales for the first seven weeks of FY2013 have increased by a remarkable 8.9 percent on comparable basis.
”Given the exceptionally challenging environment faced by The Athlete's Foot during the year, we are very pleased with the results our businesses delivered,”h said Hilton Brett , CEO of RCG Corporation. ”The resilience of the group is a great testament to the focus, dedication and skill of TAF's franchisees, management and staff.”
Together with its continued focus on sales, service and network profitability, TAF undertook and executed several major strategic and operational initiatives during the year. Foremost amongst these was the development of a comprehensive multi-channel strategy which culminated in the delivery of the TAF e-commerce site at the beginning of June, 2012.
”TAF has worked exceptionally hard with all its stakeholders, particularly its franchisees and customers, to deliver a seamless, compelling and engaging multichannel experience that not only provides customers with a unique online shopping option but also leverages the store network to drive greater traffic to the business as a whole,” continued Brett. “We are very pleased with the way the online business has begun and significant ongoing investment will ensure that we are always able to meet our customers' expectations. We have no doubt that our commitment to multichannel will drive future growth through both the online and bricks and mortar channels.”
Shoe Superstore (SSS)
Despite growing total sales by 53.2 percent to $8.9 million and comparable sales by 4.9 percent, RCG's other retail business, Shoe Superstore, had a more challenging year, posting an EBITDA loss of $200,000. Strip shopping precincts, where most SSS stores are located, have been hardest hit by the downturn in specialty retail. This has exacerbated the already difficult environment faced by footwear retailers.
“Despite its challenges, SSS is an important contributor to the delivery of RCG's overall strategy,” said Brett. “It continues to innovate and lead the way in RCG's online capability and is an important channel for our wholesale business. A full operational review of SSS is currently under way and steps are being taken to realign the business to appeal to a younger consumer with a greater proportion of vertical product.h
Management expects to be able to measure the impact of some of these initiatives by the end of the Christmas selling season.
RCG Brands Rides Merrell to 52.1 percent sales growth
RCG Brands (RCGB), RCG's wholesale and distribution division, experienced another excellent year. Sales grew 52.1 percent to $24.8 million and EBITDA improved 32 percent to $4.1 million. These results were delivered due to the growth of the Merrell business and the full scale commencement of the CAT business.
”This is an extraordinary result for a business which is less than three years old,” said Brett, ”and these results are a testament to the efforts of the team and the quality of the brands that they distribute, with further growth expected in the current financial year.”
Merrell continues to be the mainstay brand in the RCGB stable. With a focused product offering across multiple categories and a continued investment in inventory and customer relationships, Merrell has grown substantially as a brand in the Australian market place since being acquired by RCG and has defied the trend in the branded footwear space.
The CAT business was the other major contributor to RCGB's growth during the financial year. Although the CAT footwear license was acquired in April 2011, the business did not commence in a meaningful way until the second quarter of the 2012 financial year and began to ramp up significantly when RCGB acquired the CAT apparel license in January 2012, making it the first Australian distributor to hold both licenses.
“CAT footwear and apparel, which is sold in more than 150 countries worldwide, is the most recognisable industrial brand in the world. The brand is growing strongly across both the industrial and casual categories and we expect it to deliver substantial growth in FY13 and beyond,” stated Brett.
RCG has announced that it will pay a fully franked ordinary final dividend of 1.75 cents per share on Wednesday 28 September 2012 to shareholders registered on the 12 September 2012 record date. RCG's dividend reinvestment plan will not apply to this dividend.
The ordinary final dividend takes the total of ordinary dividends in respect of the 2012 financial year to 3 cents per share, the same as those in respect of the previous year.