There has been plenty of bad news announced during the first-half profit reporting season, but a few smaller companies have managed to prove that it is possible to keep growing in a downturn – if your strategy is right.
Three such companies announced impressive results yesterday.
Discount retail chain The Reject Shop impressed with a 10.1% rise in first half profit to $15.6 million, while comparable store sales (which removes new stores) increased 5.9%.
Domino’s Pizza Enterprises posted a profit of $6.3 million for the six months to 31 December, an increase of 2.8% on the previous corresponding period. But chief executive Don Meij is confident of the company meeting its profit forecast of a 15% increase for the full year.
Finally, online travel site Wotif posted a 21% increase in net profit for the first half to $20.6 million, with revenue climbing from $41 million to $58.6 million. Most impressively, the company became one of only a handful to actually increase its dividend, which rose from 6c to 6.5c.
The link between these companies is fairly obvious – they are all seen as “value” or “discount” options in their sector. These companies always tend to be resilient in a downturn, as shoppers look to save money and indulge in cheap treats.
But that’s not the only secret of the success. Here are a few other lessons:
They have continued to expand. Domino’s added 15 stores during the first half and plans to open another 40 by June. The Reject Shop opened 15 stores and is even running its eye over collapsed discount chains Crazy Clark and Go-Lo. Wotif made several acquisitions last year and now owns more than 100 travel-related websites.
They have stepped up marketing. Wotif launched its first major advertising campaign last year, increasing its visibility at a time that most operators in the travel and tourism sectors were frantically cutting costs. Domino’s, which is about to experience a major challenge from Pizza Hut (which is investing $4 million in its new Pasta Hut brand) pumped $11 million to revamp and promote its menu.
They continue to invest in technology. The Reject Shop is set to launch a major new business-wide IT system built by SAP in April. Domino’s is also investing heavily in its website, improving online ordering capabilites, building its social media presence and grabbing a foothold on the TiVo personal video recorder e-commerce platform.
Can any of these lessons by applied to your business?
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
