Betts pulls on boots for recovery

Shoe retailer Betts Group has returned to profitability after cutting nearly 130 stores in the past two years, and chief executive Daniel Breckler is confident the business is now on the right path.

Betts achieved a profit of $446,488, following a loss of nearly $6.5 million in the 2018 financial year, according to its annual report, lodged with the Australian Securities and Investments Commission.

Revenue fell 30 per cent to be $74 million, while cost of sales were squeezed down 31 per cent to be $34.6 million.

The Malaga-based business was established in 1892 and is now in the fifth generation of the Breckler family, with Daniel Breckler and Andrew Breckler currently serving as directors

Mr Breckler told Business News the emergence of online retailing had a dramatic impact on the sector, but Betts was now in the right position for the longer term. 

“We made a pretty courageous decision three years ago that we would dramatically reduce the number of bricks and mortar stores, and that’s the plan we’ve been on over the past couple of years,” he said.

“It’s been an expensive and painful exercise, closing stores … having to let go a number of staff.

“But we’ve completed the program now.

“We now have what we consider to be about the right number of stores.”

The company was operating 201 retail stores across the country in the 2018 financial year, but trimmed that to 83 by July 2018 and then to 72 at June 30 this year.

Mr Breckler said the growth of online shopping had transformed retail over a period of about five years.

Betts has grown its own online offering, he said.

“(We have) an online business we operate through six different channels,” Mr Breckler said.

“The last 12 months have seen the (overall) business stabilise and make a small profit.

“Having been through the restructure and repositioned ourself, I believe we’re positioned to take advantage of opportunities as they arise moving forward.

“We have the right balance today between bricks and mortar, and online.”

About 22 per cent of the company’s sales come through online channels, including third party retailers. 

“We’ve invested and developed to ensure (our) site is easy to navigate and customer friendly,” Mr Breckler said.

“We've just recently started an international website where we’re selling shoes into Hong Kong and Malaysia.

“From an online perspective there’s still some room for growth.”

Airflex and Zu brands were reintroduced to the business through its retail stores, making about 30 per cent of sales between them.

The other big win was a fall in distribution expenses of nearly $10 million, to $17.9 million.

That came after the company shifted its distribution centre from Perth to Melbourne in April of this year.

“The new location is now close to the majority of our retail network and online shoppers, resulting in improved speed to market and reduced costs in distributing products,” the annual report said.

Betts has also been backed by its lender, the Commonwealth Bank of Australia.

The company has accessed $7.4 million through an overdraft facility as at June 30, and a bank guarantee of nearly $800,000.

Betts repaid about $500,000 to Commonwealth in October 2019.

Further repayments will be needed in the months ahead, with repayment terms requiring the overdraft be reduced to $6 million by March next year.