Is Super Retail Group, owner of the Super Cheap Auto, BCF and Goldcross Cycles chains, Australia’s best retailer?
According to investors, it’s right up to the top of the list.
In a year in which investors have sold off retail stocks sharply, Super Retail Group is one of the only major retailers to see its share price actually rise in the last 12 months – not even the giant Woolworths can boast that.
On Friday, the company posted its 2010-11 results and showed why investors have so much faith in the company.
Net profit soared 46.1% to $55.6 million, group sales increased 16% to $1.1 billion and life-for-like sales rose 4.7%. The company even managed to reduce its net debt by $5.3 million to $73.5 million.
“New stores, solid like for like sales growth and a strong improvement in gross margins are the major drivers of these results. They have been delivered through a continued focus on new product introduction, sourcing and supply chain initiatives and the further development of business capabilities,” managing director Peter Birtles said.
Which is a good way of saying that Super Retail did most things pretty right. Here are five features of the company’s strategy that every entrepreneur can learn from:
Remember cash is king
Every SME entrepreneur knows the importance of cash, but Super Retail Group highlights that even a $1 billion company needs to concentrate on cashflow. Operating cashflow increased $18.3 million to just over $70 million during the year and this cash gave the company plenty of ammunition to grow the business – almost $50 million of new store fit-outs and refurbishments was funded from cashflow.
Sell the right products
Through all of its retail chains Super Retail must negotiate a delicate balance between branded products that customers expect to see and its own brands – which usually have better margins. In the last 12 months, a lot of time has been spent on developing more home brands, including bicycles in the Goldcross chain.
Buy smartly
Gross margins improved across Super Cheap Auto, BCF and GoldCross cycles thanks to some very smart product sourcing, with the company effectively cutting out of the middle man and sourcing directly from overseas – the value of product sourced from China grew 150% to $70 million last financial year. While many Australian firms have bemoaned the strong Australian dollar, it’s been a big help for Super Retail Group. The company also improved margins in its BCF chain by directing more products through distribution centres rather than direct from trade partners to stores.
Invest in people
There’s a fascinating slide in Super Retail’s results representation on its five year goals for staff – 75% retention 75% engagement, 70% of positions filled from within and average job vacancy of less than four weeks. The company says its investing particularly in retention at present and with good reasons – not only to new staff cost money to replace and train, but experienced staff are more productive. This isn’t just touchy feely stuff – it makes a real difference to the bottom line.
Develop a multi-channel strategy
This is something Super Retail Group is investing heavily in – $7 million in the 2011-12 financial year. While the bulky nature of many of its products wouldn’t seem to suit online selling, the company plans to develop its web site to offer customers the option of buying online and picking up in store or having home delivery. It will be interesting to see how the model goes, but at least this big-box retailer is prepared to keep properly embrace multi-channel retailing.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
