Super Retail Group has declared a digital future and its shares are tanking

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The Super Retail Group, the owner of Rebel, BCF and Super Cheap Auto, is positioning itself for growth from digital channels rather than its bricks and mortar stores.

Shares in the company dropped hard. At the close, they were down 14.4% to $7.03.

“We expect that digital channels will present the key opportunity for growth and we will invest in further increasing our share of customer spending in those channels,” says Peter Birtles, Group Managing Director and CEO.

“Although this investment will constrain growth in operating margins in the current year, it will strengthen our businesses to better meeting changing customer expectations and better position the Group for long term growth.”

Bricks and mortar retailers have been hit by a shift to digital, sagging consumer sentiment and more competition from global players, including Amazon, in Australia.

Super Retail sees minimal growth from physical stores. The future, it says, is digital as this slide from its half year results shows:

The company today announced a 2.2% rise in sales to $1.3 billion for the half year to December. Net profit was down 3% to $72.2 million.

“We are encouraged that over the first half of the financial year we have increased our overall market share against our key competitors and markedly increased our share of the digital market in each one of the three markets in which we operate,” says Birtles.

Auto retailing sales increased 5.6% to $516.7 million with like for like sales growth of 3.5%. Leisure retailing sales fell 3.8% to $299.1 million. Sports retailing sales grew 2.7% to $503.8 million with like for like sales growth of 1.1%.

The company also announced the purchase of adventure clothing chain Macpac Holdings Pty Limited, which has 54 stores across Australia and New Zealand, for $NZ144 million ($A135 million).

Super Retail’s Rays and Macpac will be consolidated under the Macpac brand, creating a rival to Kathmandu.

“The integration of the business with Rays provides an opportunity to position Macpac as the leading outdoor adventure specialist across Australia and New Zealand providing a much broader range of quality products, information and services than any other retail business,” says Birtles.

The company declared a fully franked dividend of 21.5 cents a share.

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