‘Significant deterioration of trading’ leads to board changes at fishing retailer

Rotherham-based Fishing Republic saw a 13% decline in like-for-like sales in October, leading to the firm issuing a trading update this morning which stated the group had seen a “significant deterioration in trading.”

As a result, shares in the firm have this morning dropped 40%. CEO Steve Gross is to step down today and will be replaced by Chris Griffin as acting chief executive. Zoe Gross, operations director, and Paul Hagerty, IT director, will step down from the Board with immediate effect. Steve Gross will remain an executive director.

Griffin has been tasked to conduct a strategic review with a mandate to explore all options to drive long term value for shareholders. The online and e-commerce business is where the firm is looking for improvements.

The trading update said  the “significant deterioration in trading” reflected a substantial increase in price competition as major competitors and independent stores aggressively sought to maintain their market share, particularly at the end of the main fishing season.

It said: “As a consequence of this change in market conditions, for the first time this year, monthly like-for-like store sales reduced, with a decline of 13% in October.  This is in contrast to like-for-like sales growth of 16% experienced in the nine months up to the end of September.

“Our online business has been similarly affected and, whilst sales via our own website are up 116% and overall online sales are up 24% in the year-to-date, the transition from third party sites to our own website is behind our expectations.

“Although there are still two important trading months to come, the Board believes that, unless market conditions change, the trading performance for the year to 31 December 2017 will not meet market expectations and will result in an overall loss. The business remains cash positive and there will be a continuing focus on driving down stock levels.”

Griffin comes has an e-commerce, retail and logistics background and was director of e-commerce at SuperGroup plc, owner of the Superdry brand, from 2010 and 2014, during which time online sales grew from £3m to £60m.  More recently, he founded and built the supply chain software business, Anatwine Limited.

The trading update continued: “Whilst the Company has expanded its store network during the year, the execution of the online model requires further focus and acceleration. The Board strongly believes that the fishing tackle market is well suited to an online model with the obvious efficiencies this brings in terms of returns on invested capital.”

Chris Griffin, acting CEO of Fishing Republic, said: “I am looking forward to addressing the issues in the business in order to turn around its trading performance.  The ongoing consolidation of the fishing tackle market provides an excellent opportunity to continue to grow the business, and there is enormous scope to improve the trading performance in what should be a natural e-commerce sector.”

 James Newman, Chairman of Fishing Republic, added: “The Board is delighted to welcome Chris to the Company to conduct his review and move the Company forward.  His experience will be invaluable in driving shareholder value and improving the execution of our business plan.”

AJ Bell investment director Russ Mould commented on today’s trading update: “Any retailer must get online right, something which Fishing Republic clearly feels it has not judging by the instant promotion of Chris Griffin, a former director of e-commerce at SuperGroup, to the position of acting chief executive.

“Pricing power is everything for companies. Fishing Republic’s admission that is has suffered from price competition is a worrying sign of weakness and that may explain why the shares have taken such a battering today, falling by 40% in early trading.

“If a company can charge the prices it wants to charge it can potentially generate the lofty operating margins which in turn drive cash flow which in turn funds the dividends which over the long run provide such a big portion of total returns from shareholdings.

“If a company cannot charge the prices it wants, then you can get a lot of volatility in sales and therefore profits and cash flow and therefore ultimately dividends, assuming there are any paid in the first place.

“Investors must therefore spend a lot of time assessing a company’s competitive position and how it is placed relative to its direct rivals, possible alternative offerings and how strong (or weak) it is when it comes to negotiations with suppliers and buyers and ultimately how easy it is for customers to buy the same or similar products more cheaply.

“Fishing Republic operates in a fragmented market, where there are lots of independent retailers battling hard for share with the company’s 19-shop estate. Even allowing for the launch of a new website in March the AIM-quoted firm has found it hard to turn revenues into profits, as it now expects a loss for the year, compared to the £500,000 profit analysts had been expecting.”