Retail Food Group is expanding its store closure program after the Gloria Jean’s and Donut King operator slumped to a $306.7 million full-year loss.
Retail Food Group, whose shares this month hit an all-time low as it tried to clean up following accusations it was badly treating franchisees, now plans to close 250 domestic stores – up from the previously announced 200 – by the end of the 2019 financial year.
Revenue for the 12 months to June 30 rose 7.1 per cent, but the company was forced to make $402.9 million in impairments and provisions to cover store closures, restructuring and a reduction in the value of its brands and assets.
Shares in the company plummeted by as much as 12 per cent following the release of its results on Friday.
At 1430 AEST, they were still down eight per cent at 57.5 cents, compared to the all-time low of 39.5 cents set two weeks ago.
Chief executive officer Richard Hinson, who replaced Andre Nell in May, said the company would continue to assess franchisee sustainability, but did not say which stores had closed so far or where the affected Gloria Jean’s, Donut King or Michel’s Patisserie stores were.
He could not immediately say how many staff had been affected.
Mr Hinson did not say whether the former management had apologised to franchisees, insisting it was about ‘actions speaking louder than words’ for his new regime.
‘The primary focus is improving the sustainability of our franchise customers, to ensure they are sustainable and profitable going forward,’ Mr Hinson said.
Late in 2017, RFG was hit with accusations from former and current franchisees that they had been run into the ground with exorbitant fees, including high marketing and food costs, poor quality food and a lack of support.
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.
RFG has more than 2,400 outlets across Australia and internationally, and employs about 15,000 employees.
Despite a ‘disappointing’ FY18 result, group chief finance officer Peter McGettigan said banks were supportive of the company’s new lending agreement, which included all financial covenants being measured quarterly from September 30.
RFG said there was ‘a material uncertainty that may cast significant doubt on whether the group will continue as a going concern’, but that its directors have concluded they have reasonable grounds to believe lenders will continue to support the business.
‘The point the directors have been very clear to make, and in agreement with auditors, is that we have the support of our financiers out to October 2019,’ Mr McGettigan said.
‘So we can operate under our own steam to then’.