Investors gave Super Retail Group a big thumbs up yesterday for deciding to rebrand its 65-store Amart sporting goods chain as the more upmarket Rebel making a total chain of more than 150 outlets.
While the move will cost Super Retail around $34 million in one-off costs, the company says there will be savings of $15 million a year.
Super Retail also told the market that it was maintaining previous guidance for a solid rise in earnings before interest and tax of 16% to 18%, a point also appreciated by investors.
Shares were up 2.3% yesterday to $8.61 (after being up more than 4% at oner stage), taking the gains since late May, the trough of the recent slump in retail stocks (when Amazon fear mania was at its peak, thanks to alarmist analysts and silly media reports), to more than 20%.
The analysts had claimed that Super Retail’s range of auto and sporting good products would be easy pickings for Amazon.
Super Retail has operated both the Rebel and Amart brand separately since buying them from Archer private equity in 2011 for $610 million.
CEO Peter Birtles said in yesterday’s announcement that investment returns would improve by running one single sports brand and the Amart brand will disappear by the end of October this year.
The change to one single brand will result in one-off costs of about $34 million. Birtles said the conversion of the Amart stores would generate improved gross margins through "range optimisation", the reduction of underperforming categories, and lower costs in marketing and administration.
"This decision is aligned with the Group’s long-standing strategy of providing customers the inspiring solutions and services they need to make the most of their leisure time,” he said.
"In realising this change, the Group will be combining the best of both brands into one single customer-focused offering that brings together Rebel’s strengths in solutions and services with Amart Sports’ customer service excellence into the one strong, national omni Sports retailer.”
As a brand, Rebel, with its ongoing focus on engaging both the casual enthusiast and serious competitor with the full range of solutions and services they need to live their sporting passions, is a strong fit
"Amart Sports’ store team members will be redeployed and transferred directly to the newly converted Rebel stores and the Group is expecting minimal impact on team members, who will be fully supported through the transition,” the company said yesterday.
Super Retail said the one-off after tax non-cash costs associated with this transformation of around $34 million will be recognised as other costs not included in Total Segment Net Profit after Tax in the 2017 financial year. One-off after tax cash transformation costs of $3 million are expected in the 2018 financial year. The capital investment in fitting out the converted stores will be about $9 million.
Super Retail said it will report its results for the 2017 financial year on August 25 "and confirms that it expects to report Group Segment earnings before interest and tax at the upper end of previous guidance of 16% to 18% above the prior comparative period.”
