RCG Corporation finding the right fit

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.

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

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