Athlete’s Foot shrugs off retail woes, but concerns remain about interest rates

Retail chain The Athlete’s Foot says it is concerned about lower consumer sentiment and rising interest rates in the year ahead, but still expects strong sales due to an increased focus on service quality.

The comments come as the company announced like-for-like sales growth of 9.7% for the year ending in April for its 142 stores, with a prediction of 25% growth for May.

RCG, which owns the chain, said in an investor update TAF recorded EBIT of $4.7 million during the first half of the year, an increase of 23.8% from the previous corresponding period. Like-for-like sales grew by 11.3% for the first four months of the year.

Chairman Ivan Hammerschlag says the retailer attributes its positive performance to an increased focus on direct customer service.

“We do think the reason for this performance is the service we offer, and consumers respond to it very well. We work hard on our direct service offering, and we also get a lot of referrals from the medical industry and so on.”

“If you go to a department store, you won’t get the same level of service. But in our stores you have employees who get down on their knees to help you try shoes on, and so on. It has the element of being in a clinic.”

But he also says the business is concerned about consumer sentiment, which plunged 7% in May according to the latest figures from Westpac.

“Consumer sentiment is obviously a big issue. The Reserve Bank has hopefully stopped pushing up rates for a period, and I think that’s the biggest pressure on retailers at the moment. Hopefully they have paused for the time being.”

Hammerschlag says this emphasis on customer service is a deliberate choice, with the company to stand firm in its current marketing approach. However, he also says the chain will introduce new stores and upgrade existing locations with more floor space to expand current product ranges.

“We are going to continue to invest in our brand, we are going to convert our stores to larger floor space models to help our customers. We’re in a very sweet spot at the moment.”

Last year the company predicted the “Merrell” brand of outdoor apparel would contribute to earnings during 2010-11, something the company says is still on the cards.

“We anticipate that the Merrell business will turn over in excess of $12 million in its first year of operation and, based on the profiles of similar distribution businesses, it is expected to deliver an EBIT (earnings, before, interest and tax) contribution in excess of 20%,” it said last year.