This morning, RCG Corporation Limited (ASX: RCG) delivered yet another strong full year profit result for shareholders.
In the year to 28 June 2015, the owner of The Athlete's Foot and exclusive distributor of many popular international footwear brands to Australia and New Zealand reported a healthy jump in revenue and underlying profit.
On a statutory basis, revenue jumped 67.4% to $135 million, but profit fell 11.7% to $10.3 million. However, excluding the $3.6 million in transaction costs arising from the group's acquisition of the Accent Group in May, profit growth would have jumped well into double digits – underlying net profit was up 16%.
The performance of The Athlete's Foot (TAF) was perhaps the only blemish on an otherwise promising annual report. TAF reported like-for-like sales growth of 1.2% for the year. However, CEO Hilton Brett said the group is undertaking a strategic review of its market position and consumer offering.
Nevertheless, he said the business' focus on service differentiates it from competitors. He added: "As a consequence, it has been able to maintain its position as a premium full‐price retailer, despite ongoing aggressive price activity in its sector."
RCG Brands, which houses Podium Sports, Merrell retail stores and much more, reported wholesale sales growth of 24% and retail sales growth of 55%.
"The outstanding results are a testament to the efforts of the team and the quality of the brands that they distribute," Mr Brett said. "We are particularly pleased with the performance of Saucony, CAT and Sperry with all three brands experiencing growth both through existing and new channels."
Finally, Accent Group performed well for the brief amount of time which RCG ran the business. The importer, distributor and retailer of names like Skechers, Vans, Dr Martens, Timberland and much more delivered like-for-like sales growth, for the five-week period of 31%.
Mr Brett said: "The ongoing performance of the Accent business is unprecedented in the current retail climate, with over 30% like‐for‐like growth over the last 12 months and double digit like‐for‐ like growth in each of the two years before that."
While RCG's final dividend is only in line with last year's payment of 2.5 cents per share (and no dividend reinvestment plan will apply), Mr Brett said the company chose not to increase the payout because it will continue to invest in the newly acquired Accent Group.
He said the board believes further investment in the retail division, "will deliver enormous long‐term value accretion."
Furthermore, "we intend to at least maintain the historical dividends per share with a view to increasing this over time, when operating cashflow allows," he said.
The best retail stock on the ASX
The outlook provided by the company was positive, forecasting underlying earnings per share (EPS) growth of 25% to 30%. However, the group did acknowledge the retail environment and the recent integration of Accent make forecasting challenging.
Following the profit result and subsequent fall in share price, investing in RCG is appealing at today's prices. While some including myself may argue retailers are fickle and prone to profit downgrades, if I were forced to pick just one ASX retailer to buy, RCG Corp would be my choice.
