Fishing rods-to-bait boxes seller Fishing Republic (FISH:AIM) warns it is likely to book a loss for 2017. There's been a ‘significant deterioration in trading’ over the past two months.
Founder and CEO Steve Gross (pictured below) has been moved aside as the fishing tackle retailer seeks to accelerate online sales, unsettling news that sends the shares crashing 41% lower to 22.5p.
Unfortunately, there’s no disguising the fact this is an extremely disappointing update from one of Shares Great Ideas selections.
Rotherham-headquartered Fishing Republic flags ‘a substantial increase’ in price cutting by competitors and independent stores in recent weeks, rivals fighting hard to maintain their own market share, particularly at the end of the main fishing season.
This caused Fishing Republic’s like-for-like sales to slump 13% in October, a worryingly sharp downturn given the 16% growth delivered in the nine months to September.
As we noted here in July, Fishing Republic has been joined on AIM by Angling Direct (ANG:AIM), an ambitious, acquisitive rival engaged in its own store roll-out and also growing online sales at pace, though its shares are off 3.7% at 78p on the negative industry read-across.
Only weeks after issuing in-line half year results and stating ‘prospects for the group remain very positive’, Fishing Republic, one of the largest fishing tackle retailers by floor space whose shareholders include retail titan Sir Terry Leahy , also bemoans the impact of rising levels of online competition.
While overall online sales are up 24% year-to-date, the transition from third party platform sales to own website sales is behind management’s expectations.
Unless market conditions change in the last two months of the year, Fishing Republic will not meet market expectations and will post an overall loss for the calendar year, compared with an adjusted profit before tax up 32% to £403,000 in 2016.
The rattled AIM minnow does however reassure ‘the business remains cash positive and there will be a continuing focus on driving down stock levels.’
Steve Gross, Fishing Republic’s founder, is stepping down as CEO today, though he’ll remain on the board as an executive director to support acting CEO Chris Griffin as he conducts ‘a strategic review with a mandate to explore all options to drive long term value for shareholders.’
Operations Director Zoe Gross, the wife of Steve Gross, and IT Director Paul Hagerty, have stepped down from the board ‘with immediate effect’.
Headed up by chairman James Newman, Fishing Republic’s board insists the fishing tackle market is ‘well suited to an online model with the obvious efficiencies this brings in terms of returns on invested capital’, although ‘the execution of the online model requires further focus and acceleration.'
Griffin insists ‘there is enormous scope to improve the trading performance in what should be a natural e-commerce sector.'
He apparently brings strong e-commerce, retail and logistics nous to Fishing Republic, having been Director of E-commerce at Superdry brand owner SuperGroup (SGP) between 2010 and 2014, during which time online sales grew from £3m to £60m. More recently, he founded and built supply chain software business, Anatwine.
‘As Fishing Republic indicates, the emphasis, as in other areas of the retail sector overall, must now focus on driving online efficiency and volume,’ writes broker Northland Partners, adding ‘the new appointment has all the credentials to rapidly implement this process.'