It’s about time. After years of poor performance in the retail industry, some of the market’s biggest names are bouncing back.
Already this year a number of retail groups such as Specialty Fashion and JB Hi-Fi have released their results, and they’re pretty good. Just today, Super Retail Group announced its half-year results – net profit was up 74% for the six months to December, and like-for-like sales in the company’s sports division increased 9.1%.
So what’s going on?
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
It’s not as if people are spending more, as retail sales haven’t increased all that much, and the revenue figures among these companies isn’t increasing all that much.
But retail expert and Bentley’s partner David Gordon tells SmartCompany the secret among these companies isn’t making more money, but doing more with the money they already have.
“If you look at the top-line revenue results here, there’s nothing massively good about them. The revenue results might be down half a percentage point,” he says.
And while like-for-like sales are still low, Gordon says the only thing these businesses can do is work on reducing their costs. JB Hi-Fi even managed to increase its margin by 20 basis points.
Gordon suggests such efforts require new management teams who are experienced in reforming business during difficult times.
“The impediment to resizing a cost base is often a management team’s inability to understand and operate in that type of environment.”
“When demand was really high, you didn’t need to run a slick operation and a number of retailers lost focus. They tried to do a number of activities outside their key business.”
So while the better retail results may not suggest we’re spending any more money, there’s definitely reason to celebrate. Here are five of the best retail results of the year so far:
Super Retail Group
This company has been powering ahead over the past year or so, acquiring new divisions and bolting on new companies to increase performance. This year the company announced a 73.5% increase in net profit to $60.6 million.
Even more impressive are the divisional results. The Auto Retailing Division recorded sales of $400.2 million, up 8% from the previous corresponding period, while the Sports Retailing Division recorded sales of $352.4 million – like-for-like sales were up 9.1%.
While it’s hard to judge Country Road’s performance given the business acquired the Witchery brand, there is still good reason to suggest the company is on the right track. Profit after tax increased by 110% to $22.1 million, while like-for-like sales increased by a big 10.1%.
JB Hi-Fi has had a tough run, with the consumer electronics space obviously a tight squeeze. But the company still managed to report a 3.1% increase in net profit after tax, along with a 23% increase in total sales.
And while like-for-like sales were still down 3.5%, chief executive Terry Smart was able to demonstrate a strategy to cut costs by clamping down on discounts and keeping a store expansion plan to a date limit.
Speciality Fashion Group
Speciality Fashion has had a tough few years, announcing hundreds of store closures last year and the discontinuation of the La Senza brand. But a focus on moving into uncharted territory – online sales – has helped the company improve its net profit from $6.16 million to $17.97 million for the first half of the year.
And despite the lip-service given to online retail by some of the other larger companies, Specialty Fashion said a large portion of its growth was due to pursuing online sales.
Earlier this month, travel and outdoor gear retailer Kathmandu reported a “satisfactory trading performance” for its first half, with a profit upgrade of 42%.
While this is partly due to the company’s effort in restructuring stores, this gem from chief executive Peter Halkett should give the retail industry reason for celebration:
“Our sales in Australia have continued to grow at a faster rate than New Zealand, which reflects the continuing strengthening of the Kathmandu brand and market penetration in Australia,” he said – perhaps a sign consumers are starting to feel more confident.