Citing an "alarming decline in high street shopping over the last 12 months," RCG Corporation (ASX: RCG) announced yesterday that it has decided to discontinue its Shoe Superstore business, which racked up a trading loss of nearly $1 million last year. The chain has been put into voluntary administration, and some of the stores will be closed while the administrator seeks expressions of interest from prospective buyers.
RCG acquired the chain four years ago, yet recently the stores' performance was dragged down "by a shift in consumer shopping habits away from strip locations and the ongoing reluctance of the core, mature consumer to spend on discretionary items," said chief executive Hilton Brett. "We do not see these trends reversing in the foreseeable future, as a result of which we do not believe the Shoe Superstore business to be viable in the long‐term."
Bright spots in The Athlete's Foot, wholesale and Merrell stores
Yet RCG's half year results, released Wednesday, revealed some promising aspects of the shoe business. For starters, consumers are responding well to RCG's franchised The Athlete's Foot business, which saw overall sales rise nearly 7% to $92.4 million.
The company's wholesale and distribution division saw promising results as well, with wholesale sales up 27% and retail store sales up 335% on new store openings. In all, the company opened three new Merrell stores during the first half of the year, and plans to open another two before the end of its financial year.
Vastly outperforming the index, paying out the cash
In the last five years, RCG shares have trounced the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), as well as other companies in the retail sector, from Specialty Fashion Group (ASX: SFH) to even strong performers like The Reject Shop (ASX: TRS).
On March 22, RCG shareholders will receive an interim dividend of 1.75 cents per share, 40% higher than last year's interim dividend.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.
