RCG Corporation finding the right fit

Closing Shoe Superstore chain drops earnings by 36.4%.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The owner of The Athlete's Foot Australia and  Australian distributor for the Merrell Cushe, Chaco and CAT (Caterpillar) brands of footwear and apparel, RCG Corporation (ASX: RCG) has had a mixed year.

Revenue growth was flat, down 1.8% from $34.79 million to $34.14 million, and net profit was down 36.4% due to the costs associated with the discontinued operation of the Shoe Superstore, lowering earnings from $9.19 million to $5.84 million.

The Shoe Superstore was put into voluntary administration in February 2013. The administrators have sold the business operations and a majority of stores operate under new owners. RCG wrote off its investment in the business at the half-year, and expects no further financial or operational impact from it. The cost of this restructuring was recorded as $4.67 million against this year's net profit.

Looking at the earnings of continuing operations, this year was $10.5 million, a 10.4% improvement on last year's $9.5 million. Based on this, earnings per share of the continuing operations were 4.3 cents. The company has a dividend policy of paying out 90%-95% of earnings as dividends, and has declared a 2.25 cents per share dividend fully franked, bringing the full year dividend to 4 cps — up from 3 cps last year.

The company announced the introduction of a new biometric fitting analysis tool called Fitzi, replacing its original FitPrint technology that became a unique selling point for scanning customers' feet to match the best fit for shoes. The new tool not only measures the dimensions and weight distribution of feet, but also analyses the way a person walks via a pressure sensitive walking pad and video capture.

Like for like sales were up 4.1% for the year, though the last four months of trading were only up 2.1%.

For FY2014, the The Athlete's Foot division plans to open at least three new stores and convert at least 15 stores to the new format, bringing the total store number to 64. RCG is forecasting like for like sales to increase by 3%-4% for the new year.

The RCG Brands shoe wholesale distributor division increased sales by 21.2% to $27.8 million. Merrell brand sales grew by 7%, and CAT sales were up 212%. Four new Merrell stores brought the total to eight, and has extended its distribution agreement with Wolverine Worldwide to 31 December 2019.

In addition, RCG Brands has been awarded exclusive distribution rights for Sperry Top-Sider, the iconic boat shoe brand, from 1 January 2014. From 2015 onwards the brand sales should contribute positively to profit.

RCG Brands is planning to open another four to six stores, bringing the total to 12-14.

RCG Corporation's share price has risen 90.9% from $0.33 in July 2012 to $0.635 as of 23 August 2013, in comparison to the 22.1% rise in the S&P ASX All Ordinaries Index (ASX: XAO) over the same period.

Foolish takeaway

Some of the best investment ideas are ones around us or where we do our own personal shopping, so when out shopping, notice where you and others are spending your money, and research those companies for investing inspiration.

Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »