Super Retail Group’s Record Result Amidst Underpayment Claims

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By Published On: August 21, 20180 Comments

Super Retail Group's strong results have come at a time when its CEO has admitted to almost $8m in underpayments since 2010.

Super Retail Group has said that it has underpaid workers by almost $8 million from a period dating back to 2010.  An internal review uncovered the underpayments which relate to workers in its ‘set-up’ team, which fits-out or refurbishes its stores, incorrectly applying time in lieu, penalty rates and allowances to overtime hours. Accounting firm BDO is working through the underpayments and back pay amounts, with workers receiving  5.5 per cent interest per year on top of what they are owed. The Group said that it reported the breach itself directly to the Fair Work Ombudsman and has set up an information line for those who think they may be have been affected during the time period.

“This business prides itself on how we treat our team members and we have let them down,” said CEO Peter Birtles, explaining that the underpayments were a genuine mistake. “I’m personally very sorry that we’ve done that.”

Revealing these underpayments came on top of what would otherwise be a positive day for the Group, announcing net profit after tax for the full 2018 financial year of $128.3 million. After adjusting for items not included in total segment net profit after tax, normalised net profit after tax (NPAT) was $145.3 million. The Group’s Segment Earnings Before Interest and Tax (EBIT) was $219.6 million, an increase of 5.9 percent year on year with an operating cash flow of $308.4 million ($73.9 million higher than the previous corresponding period).

It has been a year of significant change for the Group with the merging of Rebel and Amart Sports, the acquisition of Macpac (for NZ$144 million) and merger with Rays. “The acquisition of Macpac completed with an effective date of 31 March 2018 and it performed strongly over the subsequent three months, contributing $7.8 million EBIT,” said CEO Peter Birtles. “We have closed six Rays stores and will be converting the remaining nine Rays stores to Macpac large format stores in the fourth quarter of the coming financial year. This will eliminate the losses contributed by the Rays business over recent years.”

The Group’s outdoor retailing segment consists of the BCF, Rays and Macpac businesses. Following the completion of the successful trial of an outdoor adventure large format store under the Rays brand, the company announced its intention of building an outdoor adventure business through the acquisition of Macpac and merger of the business with Rays. After the acquisition, six Rays stores that were not suitable for the business model were closed in June 2018 with the remaining nine Rays stores to be converted to large format Macpac stores in the fourth quarter of the current financial year. For this outdoor retail segment, online sales increased by 76 percent year on year.

In the first half of the year, the Group converted 68 Amart Sports stored to the Rebel brand which impacted sales and margin performance, consolidating the products ranges across all stores. “The operating cash flow performance was again very strong demonstrating the Company’s ability to generate working capital savings to fund its investment in new and refurbished stores and in building its omni-retail capabilities. As a result net debt increased by only $42.2 million, even with the debt funded $133.8 million acquisition of Macpac,” Birtles said.

Total sales for the Sports Retailing Segment grew 3.2 per cent to $979.2 million, with 2 percent like for like sales growth driven by transaction number growth. Online sales increased by a huge 152 per cent on the previous corresponding period, benefitting from the introduction of click-and-collect in October 2017.

“Our investment in building our omni-retail capabilities has underpinned strong growth in our on-line sales and we continue to extend our offering to our customers through additional ranges and services and improved in-store and on-line experience,” Birtles explained. “Growing our share of customer spending in our markets is a key priority as the retail industry evolves with the impacts of new competitors and of technology. We aim to incrementally grow our share of customer spending in stores while significantly increasing our share of customer spending in digital channels.

In the auto-retailing segment, Super Cheap Auto’s online sales increased by a massive 85 percent year on year. The Group says that this was driven primarily by industry-leading click-and-collect service levels.

Off the back of this growth, the Group has had a solid start to FY2019, with each business delivering positive like for like sales growth. The Group has also said that it is booking provisions in its full-year accounts of $7.9 million in anticipation of back payments to workers who were underpaid since 2010.

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