Super Retail Group’s shares have tumbled after the sports and auto retailer announced weak first-half results and a surprise $135 million takeover of New Zealand outdoor brand Macpac.
Super Retail Chief executive Peter Birtles said research had shown a gap for a “big box” specialist in the $2.2 billion Australian adventure outdoors retail market and the best strategy was an acquisition.
“We have looked at other businesses that could be part of that strategy but we felt Macpac was the best one,” Mr Birtles said.
“Macpac is in the sweet spot in that it is established, it is performing well with a credible brand and still has lots of opportunities for growth.”
Macpac has 54 stores across Australia and New Zealand and has current annual sales of about $NZ95 million ($A86 million).
Super Retail will fund the purchase, from a private equity group, with debt and will wrap its Rays and Macpac stores together under the Macpac brand.
Shares in Super Retail tumbled 17 per cent in early trade and finished the day down $1.19 cents, or 14.5 per cent, to $7.03 as investors reacted poorly to the announcement.
Citi analysts said the Macpac buy was “likely to be treated with skepticism” given the price and Super Retail’s writedowns on some previous acquistions.
Morgan Stanley analyst Tom Keirath said it was surprising that the company was increasing its presence in the leisure category, given it has not been one of the group’s best performing divisions.
Super Retail, which owns Supercheap Auto, outdoor stores BCF and Rays and sports store Rebel, posted a net profit of $72.2 million in the six months to December 30, down three per cent compared to the same period a year ago.
Supercheap Auto’s like-for-like sales rose 3.5 per cent, while sales in BCF and Rays grew 1.6 per cent.
Rebel lifted like-for-like sales 1.1 per cent, while total sales rose 2.7 per cent.
Citi analysts said Super Retail’s underlying earnings of $114 million was below the prior year and five per cent below their forecast due margin pressure across the business.
Mr Birtles said the first half was affected by one-off costs linked to the rebranding of the company’s Amart Sports outlets as Rebel stores and a revamp of BCF stores.
The company is up against a cautious consumer and fierce competition from Amazon, which launched locally in December, and the world’s biggest sporting goods retailer Decathlon, which recently opened its first physical store in Australia.
Mr Birtles said each division had seen growth in like-for-like sales so far in the second half.
SUPER RETAIL GROUP CUTS HY PROFIT AND PUTS ON MACPAC
* Profit down 3pct to $72.2m
* Revenue up 2.2 pct to $1.3b
* Interim dividend unchanged at 21.5 cents, fully franked