Macpac Deal Fails To Mask Outdoor Problems At Super Retail

By Glenn Dyer | More Articles by Glenn Dyer

In an effort to bury its poorly performing business Ray’s outdoor business, Super Retail Group will spend $135 million in buying a Kiwi-based rival and bury it via a merger.

Investors saw through that and sent the shares down 15% at one stage yesterday because they didn’t like the quality of the half year report with its weaker than forecast sales growth and earnings performance.

The shares ended at $7.03, down 14.4%. Not a happy bunch of campers among investors or analysts.

Super Retail said yesterday it had bought adventure apparel chain Macpac and will merge it with its existing Rays business to create a new outdoor powerhouse to rival market leader Kathmandu, another Kiwi-based chain (in fact both Macpac and Kathmandu were founded in Christchurch).

Super Retail Group, which also owns Supercheap Auto, Rebel and BCF (Boating, Camping, Fishing), said the merged business will operate under Macpac’s name and logo, effectively burying Ray’s Outdoor for good.

Macpac has 54 stores across Australia and New Zealand selling mostly its own brand of outdoor equipment and will add the 15 under Ray’s.

“The Macpac business has performed extremely well over recent years,” Super Retail’s chief executive, Peter Birtles, said in a statement.

"Yet there remains a significant opportunity to grow the business in the near future through opening new stores and growing its digital and commercial channels."

Mr Birtles said combining Macpac and Rays would position Macpac as the leading outdoor adventure specialist retail in Australia and New Zealand.

He said that Macpac’s expertise in design and sourcing of private-label apparel would add value to Rebel and BCF.

The new combined Macpac business will operate in two store formats: small-format stores similar to the existing Macpac stores that sell mostly private-label apparel and limited footwear and accessories; and large-format stores with a wider range of both Macpac and other branded products.

Macpac, founded in Christchurch in 1973, was expected to generate sales of $NZ95 million ($A88 million) in the year to the end of March, while Super Retail’s Rays and BCF had combined sales of $A553 million last financial year.

Kathmandu has about 164 stores across Australia and New Zealand and total sales of $447 million last year.

The interim results from Super Retail showed the weakness of the outdoor business for the group. Earnings fell in its outdoor and leisure businesses, with BCF cutting prices to remain competitive and Rays running at a $3.5 million loss because of its “sub-scale” business and trail initiatives converting to a new format (No wonder management wanted Macpac and bid high in an ‘auction’ held this week).

But it was Super Retail revalation of a weak interim performance across its range of brands that hurt the share price.

Total sales for the six months to December 30 grew 2.2%, while earnings before interest and tax slid 1.4% to $113.6 million, which was a weak outcome (forecasts were around $126 million in the market). Comparable sales grew 1.1% at Rebel sport and 3.5% at Supercheap Auto.

Underlying net profit (excluding $2.7 million in business restructuring costs) rose 0.6% to $74.9 million, below market forecasts at around $82.6 million. Super Retail kept its interim dividend unchanged at 21.5 cents, a sure sign of the toughness of the trading environment right now across retailing.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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