Super Retail Group (SRG) will close its New Zealand FCO Fishing Camping Outdoors chain following a strategic review of its performance and potential.
The strategic review identified that there were opportunities to improve the performance of the FCO business but that it is very unlikely that the business would achieve SRG’s return on capital hurdles within a reasonable time period, CEO, Peter Birtles said.
There are 13 FCo stores on the North Island, all of which will be closed by the end of June.
Birtles said that the decision to close the FCO business just three years after the first stores opened was disappointing.
“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,” he said.
“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.
The group has made associated provisions of A$19.2 million of which A$6.1 million relates to inventories, $5.7 million relates to fixtures and equipment and A$7.4 million to onerous leases.
The news comes as SRG revealed a net profit after tax for the 26 week period to December 27 of A$33.6 million.
After adjustment for restructuring costs, net profit after tax for the group, which owns the Super Cheap Auto, Rebel (Australia), Amart, Ray’s Outdoors, and BCF Boating Camping Fishing chains, was A$58.1 million.
Birtles, said the overall group results were reflective of a solid contribution from the auto and pports divisions, offset by a lower contribution from the leisure division in which FCO sits, and higher depreciation and amortisation costs.
“The Auto Division delivered a solid result having trialed a number of new marketing and promotional activities during the half year which have had a mixed effect on both top line and gross margin. We will be applying the learnings from these trials in the second half,” he said.
“As expected, the leisure division continued to see like for like sales fall below last year as a result of cannibalisation and the mining sector slowdown, but as forecast this impact began to diminish as the half progressed. Importantly, the business increased gross margins through more effective promotional management.
“The recovery in sales momentum in the sports division was particularly pleasing highlighting that the system issues encountered in the prior financial year have been largely addressed. Having rebuilt sales momentum, the division will broaden its focus towards lifting gross margin and reducing inventory in the second half.
“We continue to make positive progress in developing our multi-channel capabilities. The new Sydney Distribution Centre was fully operational in April 2014 and the new Brisbane Distribution Centre
commenced operations this month. The investment made in supply chain and IT across the group has driven the 24 per cent increase in group and divisional depreciation and amortisation charges.”
Sales in auto retailing increased four per cent to A$431.5 million. Like for like sales growth was 2.1 per cent, building on like for like growth of 2.3 per cent in the prior
comparative period.
Leisure retailing sales decreased by 1.6 per cent to A$302.1 million, with like for like sales declining by 5.1 per cent. The like for like sales trend improved during the half, to negative eight per cent for the first 16 weeks and then negative 2.3 per cent for the final 10 weeks of the half as the impact of new store cannibalisation diminished.
Sports retail sales increased 13.9 per cent to A$421.5 million. Like for like sales increased by 6.1 per cent over the 26 week period with particularly strong growth towards the end of the half.
