We had two confident updates from the lower strata of retailing.
Thorn Group, the financier and renter of household appliances and furniture says it expects a substantial increase in earnings for fiscal 2012 after reporting a 30% jump in net profit for the first half of the year to September.
And RCG Corporation, which controls a number of footwear outlets and brands, is confident about the coming year, according to statements and presentations from yesterday’s AGM.
That confidence was despite the company revealing a sluggish start to trading in the current financial year.
Thorn told the market yesterday that net profit rose 29.5% to $14.3 million in the six months ended September 30, from $11 million a year earlier.
Revenue rose 20% to $96 million from its various businesses which are centred on the Radio Rentals and Rentlo operations.
Thorn said the increase in profit was due to its ability to perform under challenging market conditions while demonstrating the strength of its long-term recurring revenue streams.
"Growth in the core Radio Rentals/Rentlo business was again a key driver in Thorn’s performance and is very pleasing given the tough retail market," the Group said in yesterday’s statement.
Managing Director John Hughes said continued strong performance of the consumer rental business was a real positive, particularly when compared to industry trends.
He said the company’s performance "reinforces the strength of this business, predominantly through its long-term recurring revenue streams and customer loyalty".
Thorn said it had benefited from positive contributions from all of its growth initiatives which provide a "sound base for future expansion" and record levels of installation volumes were achieved at the start of the year, with furniture being the standout performer, experiencing volume growth of 26% on the 2010 year.
Flat panel televisions and whitegoods also recorded solid growth.
Interim dividend was increased 13% to 4c a share.
The company said that, "Subject to current economic conditions remaining stable Thorn still expects a substantial increase in earnings for the full year ending March 31, 2012".
Thorn said it raised $30 million by issuing 16 million ordinary shares and the proceeds of the issue were used to repay $20 million of short term bank debt and $5 million of long term bank debt relating to the an acquisition and funding new business growth.
Customer arrears and write-offs were slightly above the previous half year due to some isolated operational issues but continue to run at very low rates, the company said in the statement.
Thorn provides a cheaper way for people to acquire whitegoods, furniture and cash. In the current sluggish economic conditions, the company should continue to do well.
Thorn shares rose 7c to $1.70 yesterday, a wise of more than 4% in a market that was lower all day.
Shoe seller RCG Corporation is not as upbeat as Thorn, but still expects a solid 2012 financial performance.
The company says that while the start to the year has been below par, it still expects to deliver earnings per share growth for the year despite what it describes as the worst trading conditions in 30 years.
RCG operates The Athlete’s Foot and Shoe Superstore Group, and its subsidiary RCG Brands distributes the Merrell Cushe, Chaco and CAT footwear and clothing brands in Australia.
The AGM was told yesterday that RGC expects to post a first half profit similar to the previous year’s $3.93 million.
Chairman Ivan Hammerschlag told the meeting that he also expects dividends to remain stable.
“These are the worst trading conditions I have seen in the 30 years I have been involved in retail.
"We are delighted that both our business model and our individual business units are sufficiently robust to withstand this challenging environment”, said Mr Hammerschlag.
In his trading update, Mr Hammerschlag announced that for the first four months of the financial year sales in The Athlete’s Foot were down 1.2% in total and 3.3% on a like-for-like basis.
“Whilst trading is obviously below expectation, these are still robust results considering that the business has had extremely strong growth over the same period in each of the past three years, creating a very high base," he said.
"Like-for-like growth in the same period last year was 6% and it was 10% in each of two years before that.
"And, given that according to the ABS, the footwear sector is down more 10.6% for the September quarter, we believe that we are still growing market share.
"We are delighted that both our business model and our individual business units are sufficiently robust to withstand this challenging environment."
Mr Hammerschlag said that even if like-for-like sales remain lower than the previous year, The Athlete’s Foot is expected to maintain its pre-tax profit levels in the current financial year.
The Shoe Superstore business has posted sales growth of 52.7 % in the first four months of the financial year, as it continues to expand.
