Super Retail Group says Amazon threat overstated

Vesna Poljak
May 4, 2017
AFR

Super Retail Group has escalated its defence against the looming arrival of Amazon, saying half of its bestsellers in automotive and leisure are not available on Amazon, and nor are their equivalents.

Chief executive Peter Birtles would not rule out trading on Amazon’s marketplace but believed Super Retail is more competitive on its own.

“I’m not going to say no,” Mr Birtles said about trading on the marketplace.

The owner of Supercheap Auto, BCF, Amart Sports and Rebel has been under pressure since Amazon confirmed its Australian expansion, but stuck to its 16 per cent to 18 per cent earnings growth forecast for fiscal 2017 in a Thursday trading update. Its shares rose 7¢ to $9.57, trimming this year’s loss to 7.5 per cent.

Mr Birtles blamed a “disappointing” result in the sports category on a slowdown in traffic, “particularly in the shopping centre environment”. In sports, like-for-like sales growth was 1.5 per cent for the first 17 weeks of the second-half, or 4.5 per cent year-to-date up to April 29. Leisure sales were up 7 per cent and auto sales 2.5 per cent over the same period.

In athletic footwear, Mr Birtles pointed to a weak period globally for football boots, where “Nike’s range in particular hasn’t resonated as well with the consumer”. On Monday, RCG Corp, the owner of The Athlete’s Foot and Hype, slashed profit forecasts for the second time in three months.

As for the risk of being usurped by Amazon, Mr Birtles highlighted Super Retail’s distribution relationships and its stores as its first line of defence. 

He told the Macquarie Australia Conference in Sydney 50 per cent of its bestsellers in auto and leisure were not stocked on Amazon, but “it’s a different picture in sports, it’s only around 20 per cent”, he said. This means 80 per cent of top-sellers or their equivalent products can be bought on Amazon.

On prices, he argued Super Retail saw only around 2 per cent to 3 per cent variance in major auto and sports items, and was selling below offshore online rivals in leisure.

“Most of those major suppliers, where their product is available on Amazon, that product is available through a third-party retailer,” he said, citing Nike and Castrol. Where he envisioned problems was brands brought to Australia via distributors. For example, Meguiar’s car wash was positioned by its distributor as premium brand in Australia but in the United States it was mass market. “We’re talking to Meguiar’s about that,” he said. 

“We’ll continue to work with our suppliers around exclusive product, first to market, because that is a key piece. When we look at the product that is available on Amazon marketplace [Nike and Adidas do not supply Amazon, but they are sold via third parties] it tends to be product that is not the very latest, coming towards the end of run,” Mr Birtles said.

A survey of fund managers and brokers published by UBS found that Amazon will wipe 16 per cent off discretionary retailers’ earnings and 12 per cent off grocery retailer profits within years of entering Australia. In sporting and leisure goods, sales are expected to fall 6.5 per cent and margins by 117 basis points, impacting earnings at Super Retail by an estimated 15 per cent over the medium-term, the survey indicated.