Retail Food Group to close stores
Shares in Retail Food Group – the company that owns the Gloria Jean's, Michel's Patisserie, Donut King, Brumby's Bakery and Crust Pizza Bar franchises – nosedived to a 10 year low following revelations that it is looking to close at least 200 stores after reporting a net loss of $87.8 million for the first half of the current financial year.
That figure was a steep drop from the $32.7 million profit it posted in the six months ended December 2016.
The company’s pre-tax earnings nosedived by a massive 282 per cent to $100.8 million. This was mostly due to significant write-downs totalling $138 million.
This news came after the company failed to lodge its first half results in time.
And closing 200 stores might be just the beginning.
According to a report from UBS, RFG might have to close more than 400 stores over the next two to three years and pull back on new store openings,
UBS analyst Jordan Rogers says the company might have to close as many as 456 stores in Australia between 2018 and 2020. Store closures would mainly be in its bakery division, which includes Donut King, Michel's Patisseries and Brumby's Bakery, and its quick service restaurants divisions, which owns the Crust and Pizza Capers brands.
Those numbers don’t include about 200 outlets forecast to close in 2018.
UBS has also cut its earnings forecasts for Retail Food Group by between 50 and 60 per cent, taking into account shrinking sales from store closures and weaker margins from increased investment to support struggling franchisees.
The company has blamed its “disappointing performance” on "unsustainable rent", "declining shopping centre performance" and a "sharp decline amongst domestic franchise sales and renewals"
Retail Food Group has also been plagued by allegations of systemic wage fraud, exploitation and underpayment of workers.
It also faces a potential class action from Bannister Law, which represents hundreds of disgruntled franchisees who have alleged RFG's brutal business model which demands exorbitant fees forced them into financial hardship.
Leon Getler 8th March 2018.
