- Managing Me
- Big Ideas
- Managing People
Peter Birtles has a word of warning for leaders in the retailing sector.
The managing director and CEO of Super Retail Group (ASX:SUL), which grew sales by 51.4% in 2011-12 to $1.65 billion, says the retail leaders who are publicly negative about retail are hurting their own staff. “Leaders who have publicly talked about how retail is so difficult and challenging, and how this is the worst time for the last three years, need to remember that it is not just the media and public who listen; it is your employees,” Birtles tells LeadingCompany. “If you send a message out saying life is hard, it is very difficult for your staff to come to work saying, ‘I can really make a difference’. An important part of leadership is to give your team a sense of, ‘Hey this is how we will work through the difficult times’, and to ask them, ‘What are your ideas about it?’ ”
Super Retail Group has a range of brands: Supercheap Auto, Rebel Sports, Amart Sports, BCF, Ray’s Outdoors, FCO, and Goldcross Cycles.
Net profit after tax grew by 50% to $83.5 million at Super Retail Group, in part driven by good initial results from two acquisitions made in October last year – Rebel Sport and Amart All Sports – from private equity group, Archer Capital.
All other measures – earnings per share, dividends and post-tax return on capital – also rose pleasingly. The company employs 11,500 staff.
Net debt grew substantially as well, from $73.5 million in June 2011, to $341 million at June this year, most of which went to fund the Rebel and A-Mart All Sports buys.
However, the group’s current chairman, Robert Wright, noted in the annual report that debt was “comfortably within” the group’s $500 million facility.
From family business to listed corporate
The company, started by Reg and Hazel Rowe in 1972 as a home-based mail order auto accessories business, managed a transition from family business to corporation in 1996, when Reg stepped down as managing director and became chairman.
Birtles took the top job at Super Retail Group in January 2006, after five years in the company as its chief financial officer. It was a time of big growth. The company’s revenue grew from $100 million to $500 million in the few years between 2000 and its listing on the Australian Securities Exchange in 2004. “The growth was largely delivered through opening new stores,” Birtles says. “The performance of the business in terms of like-for-like sales growth was nowhere near as strong. In fact, it was negative when I took on the job. We needed to change the focus of the company to put ours efforts not only into new store growth but on improving the performance of existing stores.”
It’s a classic problem for leading companies – making sure growth does not come at the expense of existing operations. In the case of this company, the answer to its problem did not lie in slowing growth, but taking a “good hard look” at the culture of the company.
“Although the company has a good team-based culture, it needed to be improved in some ways. Like many [mid-sized] companies, it tended to be driven from the top, and the quality of the broader leadership was not where it needed to be. We needed a strong leadership team and for that team to start to manage collaboratively.”
Although Birtles brought in a few leaders from outside, he managed to find the bulk of his 11 executives from within the group.
As a team, they set about defining the values and leadership style of the organisation. “Ours is one in which there is a strong collaborative approach. It is not consensus, but we discuss and debate issues. We are also quite good in terms of being realistic about challenges and issues.”
A change in time
Birtles believes these changes, started at Super Retail Group shortly after his appointment in 2006, contributed to the group steadily improving performance throughout the past five years.
The $124 billion consumer goods retail sector, which employs 695,000 people across 90,900 businesses, has had annual growth of -0.9% in the five years from 2008, according to research company, IBISWorld.
Back in 2008, retailers were having a great time, but the picture has soured since the global financial crisis. Falling home values, and the growth in interest rates and online sites have made consumers more discerning.
In stark contrast, Super Retail Group sales have grown 131% from $715.4 million in 2008 to $1.65 billion in 2012. The growth has been steady, year on year.
“One of the reason we have performed better than other retailers over the last two to three years is that our improvements started in 2006-07, when many others were having a good time,” Birtles points out.
Putting the rebel back into the Rebel Group
The group bought Rebel Sports and Amart All Sports (Rebel Group) from private equity firm, Archer Capital, for $610 million. The buy, which was funded by a $334 million rights issue as well as debt, sent the company’s share price down by 18%, when it was announced in October last year, to about $5.30. “It is interesting the way people have reacted,” Birtle says. “There was quite strong negativity with critics saying everyone is buying footwear online and the business will drop away. That was an oversimplification.”
Indeed it was. The share price has since risen to $9.04 cents. Combined, the two sports companies contributed $441.9 million to sales, with earnings before interest and tax of $54.5 million. The company has not reported the Rebel Group’s net profit.
Once again, Birtles turned to matters of leadership to deliver improvements. “We have made a big improvement in the culture in stores and got the team excited about working in the business again,” says Birtles. “The previous owners, Archer Capital, managed the business for different outcomes. All credit to them for their work, but their focus was more on profitability and margin that on sales growth.
“The reality is that most people who work in retail are salespeople. They enjoy seeing how much stuff they sell, finding out what were the figures today, are we beating our budget. This is the stuff sales guys get excited about, rather than achieving a growth in profit margin percentage.”
Birtles shouldered any concerns about profit margins. “We said we will manage the margins, you manage the sales. We allowed them to clear some of the older inventory. That helped to boost sales, and started to clear the stores of old product, and create space for the new, for improved displays, and helped improve with the ‘shopability’ of the stores. That was all the things they want to see their management team doing.” Shopability refers the ease with which consumers can navigate the store, find what they want and pay for it.
Birtles isn’t crowing about the Rebel Group business just yet. He says there is plenty to be done. The executive team decided the Rebel Sports stores looked a bit dated: suitable for a mum to run in and buy shoes for the kids, but not to stay and look at products for herself. The group is trying a new store format in four of its 92 stores and then, depending on consumer reaction, rolling out the changes across the chain.
Until the purchase of Rebel Group, all executives were in the Brisbane headquarters. Rebel is run from Sydney. Birtles has noticed the change: “One of our strengths has been the walking around and have a quite fireside chat to get the things solved, and not escalating them to me.” This is harder to achieve now that some of the team are in a distant office, Birtles notes.
Anyone for fishing?
Eighty five per cent of the customers who walk into the BCS (boating, camping, fishing) are blokes about to go fishing. The tents and camping accessories are a side issue to the main game. Ray’s Outdoors, on the other hand, is about family camping holidays.
But Ray’s has lost its way a bit, Birtle admits. Started in 1958, Ray’s was bought by Super Retail Group in 2010. Birtles wanted to create a clearer differentiation for Ray’s, which has about 50% female customers.
“We are working hard to give it a clear point of difference,” he says. “It will require some store refurbishment.”
The trouble child of the group is the cycle business, where like for like sales declined by 3.2%, and caused losses in the business of $4.5 million before interest and tax.
Leading through change
One key aspect of leadership is consistency, he says. “You should never be inconsistent in the way you deal with people. Team members must understand you and know how you will react. You should always be truthful and that can mean, in some cases, you have say to someone I can’t tell you that piece of information.”
The company has improved its turnover rate – a challenge in the retail sector. It retention of staff is now sitting at 71.5%, up from 59% in 2006.
Birtles says there is “an incredible amount of change” in the retail sector, and this is one of the main challenges of his leadership of the group. “The danger is that you can have a change agenda that is too big, with too many things happening at any one time. We have suffered from that. One of my key learning is to focus on what we need to focus on, and put other things to one side. It is my job to clarify of direction for the team. That is really important.”