Shares in RCG Group plunged 16 per cent to 18-month lows after the footwear retailer trimmed its full-year profit guidance amid signs of slowing demand for sneakers.
RCG chief executive Hilton Brett now expects the group to earn between $85 million and $88 million before interest tax depreciation and amortisation, compared with previous guidance of $90 million and EBITDA of $60 million in 2016.
The guidance includes a full 12 months of earnings from Hype DC, which was acquired last year for $99 million, and implies weak earnings growth from RCG's core businesses amidst increasingly challenging retail conditions.
Like-for-like sales growth at Hype and Accent slowed dramatically in the first few weeks of the June-half, raising concerns about the outlook for the athleisure category following several years of strong growth.
RCG's net profit for the six months ending December rose 31.7 per cent to $21.2 million - buoyed by the acquisition of Hype DC last August and Accent Group.in August 2015. Underlying net profit rose 34 per cent to $23.3 million, in line with market forecasts.
Underlying earnings before interest, tax, depreciation and amortisation jumped 42 per cent to $42.9 million as sales rose 40 per cent to $301.3 million.
RCG is now the largest specialty footwear retailer and distributor in Australia following the acquisition of the Accent Group in May 2015 and Hype DC in August 2016.
It has more than 400 stores across 10 different retail banners and exclusive distribution rights for 10 international brands in Australia and New Zealand including The Athlete's Foot, Platypus Shoes, Hype DC, Skechers, Merrell, CAT, Vans, Dr.Martens, Saucony, Timberland, Sperry Top-Sider, Palladium, Shubar and Grounded.
In the Accent division, sales rose 18 per cent to $191.5 million, with 28 per cent growth in retail sales underpinned by same-store sales growth of 7.6 per cent, countering a 9 per cent fall in wholesale sales. Earnings rose 32 per cent to $29.5 million, compared with full year earnings of $33 million when Accent was acquired two years ago.
However Mr Brett said same-store sales growth had slowed to 5.3 per cent in the year to date, reflecting difficult trading conditions since Boxing Day.
Accent opened 28 new stores, including 10 Platypus, 15 Skechers, 1 Vans and 1 Timberland store, taking its total footprint to 168.
At The Athletes Foot, group sales slipped 2 per cent to $96.2 million, same-store sales were flat, and earnings fell 15 per cent to $4.8 million, mainly due to the timing of Boxing Day, which fell into the January-half this year. The Athletes Foot also closed some stores for refurbishment.
The worst performer was RCG Brands, which is the exclusive distributor of Merrell, CAT, Saucony and Sperry in Australia and New Zealand and operates several Merrell retail stores, the Podium Sports outlet business and a Grounded concept store.
RCG Brands' sales slipped 2 per cent to $34.2 million, with 1 per cent growth in same-store retail sales offset by flat wholesale sales. Earnings fell 64 per cent to just $1.5 million as gross margins came under pressure from the lower $A. By mid-February same-store sales had fallen 2.8 per cent but RCG hoped for a rebound before the year end.
Hype was also disappointing, with same-store sales flat and underlying earnings coming in at $9.3 million. Hype's year to date same-store sales had fallen 2.8 per cent but RCG was aiming to achieve high single digit comps for the rest of the year.
At noon RCG shares were down 16.5 per cent at $1.16, their lowest level since August 2015 and well below the $1.42 price at which new shares were issued to part-fund the Hype deal.
