Super Retail punished for $134m Macpac buy, profit slump

The market has rejected Super Retail’s $134 million acquisition of Macpac, with shares crashing by 17 per cent yesterday.

Peter Birtles is determined to prove the market wrong. Picture: Mark Calleja

Super Retail chief executive Peter Birtles is determined to prove the market wrong over its painful snub of his $134 million acquisition of outdoors adventure retailer Macpac, after investors sent its shares plunging by 17 per cent yesterday.

Mr Birtles told The Australian the market had misjudged Super Retail’s previous deals, such as buying the Rebel sports retail chain and investing in BCF, and had misunderstood the potential to improve Macpac’s existing operations and fuse it with his Ray’s camping stores to produce a powerhouse in the $2.2 billion Australian outdoor adventure retail market.

However, the market remains sceptical, with the Macpac deal coming at a time when competition in the retail sector is intense and Super Retail’s Ray’s business struggling through a restructure that has cut sales and earnings.

Shares in Super Retail fell as much as 17 per cent yesterday on news of the Macpac acquisition and the company’s half-year result, which missed analyst expectations. It closed down $1.19, or 14.5 per cent, at $7.03.

“We are in this for the long term … the work we have done with Ray’s, managing that business as a trial, as a concept, while we have not produced a bottom line result that is because we have been investing in the trial,” Mr Birtles said.

“We have actually seen the business deliver sales growth through this trial period and ­customers responding to the ­concept.”

Macpac has 54 stores in Australia and New Zealand and annual sales of about $NZ95m ($86m).

Super Retail yesterday posted a disappointing 3 per cent slide in its net profit to $72.2m.

Normalised profit was 0.7 per cent better, but still below the near $83m market analysts were looking for, with the full-year outlook similarly pessimistic.

Total sales were almost flat, up just 2.2 per cent to $1.323bn for the first half.

While its Supercheap Auto and Rebel sports arms showed improvement, lifting both total sales and pre-tax earnings, its leisure division (BCF and Rays) went backwards on both counts.

Sales for its leisure specialist stores fell from $311m to $299.1m while earnings slumped from $20.6m to $16.4m.

A share price fro Super retail

Like-for-like sales for its leisure division rose by 1.6 per cent.

The first half was distorted by the closure and conversion of Ray’s Outdoors stores in the previous comparative period while BCF suffered from unfavourable weather conditions in Queensland, northern NSW and challenging trading conditions in Western Australia. Gross margins for BCF, once a powerhouse of the group, slipped by 40 basis points as Super Retail invested in lower prices and remaining competitive.

Its auto business grew sales to $516.6m for the half, up from $489.2m, while earnings were up slightly to $55.7m. In sports stores, sales jumped to $503.8m from 490.5m, with earnings up to 51.7m from $50.9m.

Super Retail declared a flat interim dividend of 21.5c per share, payable on April 3.