Super Retail Group, the owner of Ray's Outdoors, intends to close or rebrand half of the Australian retailer's 55 outlets. Coming after a strategic review of about 15 months, the restructuring program should cost about 38 million Australian dollars (€24.5m-$27.9m).
Super Retail Group anticipates that about AS$110 million (€71.0m-$80.8m) of the AS$135 million (€87.1m-$99.2m) sales generated by Ray's Outdoors will be retained by the group's leisure division. Further including the Boating Fishing Camping (BCF) stores, this division had sales of AS$ 543.2 million (€350.7m-$399.2m) and an operating profit of AS$ 32.3 million (€20.8m-$23.7m) for the fiscal year until June 27, 2015. The plan is to raise the division's operating profit by AS$8 million per year.
Super Retail Group says that the new “Rays” format should turn into a leading proposition in an Australian adventure outdoor market worth AS$2.2 billion (€1,420.0m-$1,616.8m). Rays should focus more sharply on outdoor and adventure activities, such as camping, hiking and paddling. It will offer a wider range of apparel, footwear and equipment for these activities.
The format has already been tested in five Ray's Outdoors stores and the company intends to convert 12 more into Rays. Another 15 stores are to be converted to another of the group's brands, and the remaining 23 stores will be either rebranded or closed down, based on an assessment to be finalized at the end of June. Other retail formats in the group are Rebel Sports and Amart sports stores, along with BCF and Super Cheap Auto.
The cost for the transformation of Ray's Outdoors includes AS$19 million relating to property commitments, AS$13 million for non-cash fixed asset write-offs and AS$6 million for other costs. The group already booked AS$20 million in impairment for the Ray's Outdoors brand in the first half of the current fiscal year.
On top of the transformation costs for Ray's Outdoors, the group is projecting restructuring costs of AS$5 million(€3.2m-$3.7m) for Infinite Retail, an online sports merchandise business, in which Super Retail Group raised its stake from 50 percent to 95 percent in November. The entire group is thus projecting restructuring costs and write-downs of AS$43 million (€27.8m-$31.6m) this year and AS$16 million (€10.3m-$11.8m) in 2017.
As part of a trading update, the group said that comparable store sales in its leisure division were up by 7 percent for the 18 weeks to April 30 and by 4.5 percent thus far in the fiscal year. Comparable store sales for its sports stores, Rebel Sports and Amart, improved by 6 percent for the 18 weeks and the same for the 44 weeks since the start of the fiscal year.
Due to the transformation, Rays will compete more directly with Kathmandu from New Zealand. The company saw its sales increase by 9.3 percent to 196.0 million New Zealand dollars (€116.1m-$132.2m) for the first half of its fiscal year, to the end of January. It sales in Australia amounted to NZ$124.2 million (€73.6m-$83.8m) for the six months, which was an increase of 8.9 percent in constant currencies and 4.3 percent in comparable store sales in Australian dollars.
Kathmandu's turnover in New Zealand advanced by 4.6 percent to NZ$ 68.2 million (€40.4m-$46.0m) for the half year and its stores in the U.K. had sales equivalent to NZ$ 3.6 million (€2.1m-$2.4m), which was a rise of 1.5 percent in comparable store sales in pounds. The group added three stores in Australia and one in New Zealand during the period.
Kathmandu's gross profit margin for the half year improved by 3.5 percentage points to 62.8 percent, due to optimized pricing and promotional activity, but the company indicated that the margin would come under pressure in the second half as its U.S. dollar hedging matures at less favorable rates. The group's net profit after tax reached NZ$9.4 million(€5.6m-$6.3m), compared with a loss of NZ$1.8 million for the same period last year, and it reconfirmed its guidance of NZ$30.2 million (€17.9m-$20.4m) for the full year.
Xavier Simonet, who started as Kathmandu's chief executive in July, said last year that the company intended to shutter its unprofitable stores in the U.K. and that its foreign expansion should take a “capital light” approach, building on its brand equity and online platform. Two of the four U.K. stores have since been closed, leaving two in London. However, Simonet reiterated in a statement relating to the half-year results that Kathmandu's profitable Australasian business could provide the foundation for further international expansion.
Kathmandu's shareholders rejected a takeover offer from Briscoe Group last year.