Retail Food Group has warned it faces a full-year loss of $87.6 million, as the embattled owner of the Michel’s Patisserie and Gloria Jean’s franchises continues to struggle with a weak market and soaring restructure costs.
RFG said on Tuesday trading was suffering under difficult retail market conditions, the impact of planned store closures and “ongoing negative sentiment regarding both retail franchising and RFG in particular”.
Last December RFG, Australia’s biggest retail food franchise owner, was the subject of media reports alleging the company had mistreated franchisees.
Allegations included franchisees being subjected to high marketing and food costs, poor quality food and a lack of support.
The company’s shares have plummeted from around $4.40 in December and on Tuesday touched a fresh all-time low of 72.5 cents before closing 1.5 cents lower at 76.5 cents.
In March RFG posted an $87.8 million first-half loss, fuelled by $138 million in writedowns and provisions for the closure of up to 200 stores.
That compares to a 16.9 per cent jump in net profit to $61.9 million for the year ended June 30, 2017.
RFG is also facing potential class actions from shareholders and franchisees.
Last week RFG managing director Andre Nell departed and Richard Hinson, who was brought in in January to review the company’s operations, was installed as CEO.
RFG’s woes come as other franchise operations, including 7-Eleven, Domino’s Pizza and Mortgage Choice face scrutiny over their franchisee practices and a federal parliamentary inquiry into the franchise industry is set to start on Friday in Brisbane.
RFG has more than 2,400 outlets across Australia and internationally, and employs about 15,000 employees.
The company said it expects to make an underlying profit after tax – which strips out one-off items – of around $34.5 million for the 2017/18 year, down 54 per cent from $75.7 million in the previous year.
Termination payments to Mr Nell and other additional one-off turnaround expenses will also weigh on its annual result, RFG said.