Super Retail Group's (SRG), which is Australia's largest sporting goods retailer, began liquidating its three-year-old FCO Fishing-Camping-Outdoors retail chain in New Zealand Jan. 26 as part of a major restructuring of its $500 million-a-year Leisure Retailing division.
Hilco Merchant Australia Pty said it began going-out-of-business sales at all 13 of FCO stores in New Zealand Feb. 26. Hilco is offering discounts of up to 40 percent on $20 million of inventory that includes branded apparel, footwear and equipment for fishing, outdoor recreation, boating, water sports and RV, caravan and tent camping.
Restructuring at Leisure Division to cost $22 million
SRG disclosed Feb. 19 that it would cost AUD$19.2 million ($16 mm) to shut down FCO and another AUD$7.7 million ($6 mm) to restructure its Ray's Outdoors business after a strategic review revealed customers of its $500-million-a-year Leisure Division were “increasingly looking to engage in ‘adventure’ activities rather than ‘leisure’ activities,” including car, RV and tent camping on private land.
“The Group has determined that there is a gap in the market for ‘an Australian adventure for all’ retail offering built around a wide range of quality outdoor products at constant fair value,” the company said. “The addressable market for the business is estimated at between AUD$1.8 to AUD$2.0 billion.”
While RSG is still fine-tuning its plans for Ray's, the company expects to close or relocate five Ray's stores as well as liquidate products that don't align with its new branding. RSG will also test three Ray's concept stores in the first half of the 2015/15 fiscal year. The Leisure division, ended the quarter with 168 stores, and expects to open six and close two in the second half of the fiscal year.
FCO can't meet profit hurdles
RSG opted to close the FCO business after concluding it was unlikely to clear the company's return on capital hurdles. FCO listed apparel and footwear from Columbia, Mountain Hardwear,
The North Face and Merrell on its e-commerce site Thursday, as well as Shimano,
Daiwa and Berkley fishing equipment, Coleman camping gear and knives
from Buck, Gerber, Leatherman, Victorinox.
“Our initial approach of developing a business specifically for the New Zealand market has proven to be flawed and FCO has always battled to get the attention it required while we have been addressing challenges in our BCF and Ray’s Outdoors businesses,” said Managing Director and CEO Peter Birtles. “We intend to focus on the plans to build the performance of both BCF and Ray’s Outdoors in Australia for the next few years.”
RSG reported Feb. 19 that sales at the Leisure division slipped 1.6 percent to AUD$302.1 million ($270 mm) in the first half of its fiscal year, which ended Dec. 27, 2014. Gross margin increased 110 basis points and EBITDA before business restructuring costs fell by 6.8% to $29.0 million ($26 mm) with EBITDA margin decreasing by 0.5% points.
Sports Retailing division reports strong growth
By contrast, sales at SRG's larger Sports Retailing division, which sells team, cycling and other sporting goods through such banners as Rebel and Amart Sports, increased 13.9 percent to AUD$421.5 million ($376.6 mm). Same-store sales grew 6.1 during the period, accelerating at the end. EBITDA grew 4.6 percent to AUD$48.3 million ($43 mm), or 11.5 percent of sales, down 100 basis points from a year earlier.
In the back half of the fiscal year, SRG will focus on reducing inventory, particularly at its Leisure and Sports divisions, where same-store sales grew nearly 6.5% and 9% respectively during the first seven weeks of the second half.
“We will be focusing on lifting gross margin but we need to be careful to manage the trade off with sales momentum in an environment in which customer confidence is still patchy,” Birtles said. “Our ability to manage this trade off will be critical in generating EBITDA margin outcomes.”
RSG disclosed Anthony Heraghty will step into the managing director role at the Leisure division in April. Heraghty has held management and marketing roles at Pacific Brands, Fosters and several marketing agencies.
“We feel that it is critical that we shift the prime focus of our Leisure Retail Division from product onto the customer and Anthony has demonstrated a strong track record in this area,” said Birtles.
