I'm sure it is fair to say that the expansion of Aldi into Australia has given shareholders of Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) the occasional sleepless night.
In fact, only today Woolworths announced major changes to its Homebrand in an effort to improve its competitive position in the supermarket space after losing ground to its rivals.
The threats posed by multinational low cost retailers are real and things may be about to get worse for Australian retailers. It was reported today in the Australian Financial Review that French retailer Decathlon is planning on expanding into Australia.
Decathlon is the world's largest sporting goods retailer. It has 1,031 stores worldwide and could be set to roll out as many as 35 warehouse-style superstores in Australia over the next decade.
The first step for the company will be an online store dedicated to Australian consumers which is expected to go live here later in the week. After which I would expect a gradual roll out of its warehouse stores across the country as it builds up its brand with Australian consumers.
One company that I feel should be very concerned is Super Retail Group Ltd (ASX: SUL). Super Retail operates two of Australia's largest sporting goods retailers in Amart and Rebel Sport. I feel these two brands could soon be faced with a loss of market share to Decathlon.
This will be very bad news for Super Retail as its sporting goods segment has been a real winner for it during a challenging period and contributes 37% of total sales.
In its recent half-year results the sports segment produced sales of $452 million and earnings before interest and tax of $43 million. This was a year-over-year rise of 7% and 9.5%, respectively.
According to CommSec, analysts are anticipating earnings growth of 10% per annum for the next two years. I do worry now that Decathlon's entry into Australia could put this growth at risk and possibly stifle any significant share price gains.
Super Retail's shares are down almost 26% so far in 2016. This could of course mean the share price has a lot of turnaround potential, but with the imminent arrival of Decathlon it might be best to be cautious with this one now.
