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.”
