Investors took a set against Specialty Fashion (SFH) yesterday after the Sydney-based women’s fashionwear group revealed a sharp rise in sales (from the purchase of the Rivers chain during the year), but a dip in earnings.
They shed 7.9% yesterday to end the day on 93c.
The market didn’t like the rise in costs associated with the Rivers purchase. Earnings Before Interest, Tax and Depreciation fell nearly 5% to $39.15 million, and net profit fell 3.8% to $12.5 million for the year to June 30.
Sales soared 20.3% to $685.04 million, boosted by the Rivers acquisition. But on a comparable store basis, they fell 0.7% after the weak first half was partly offset by stronger sales in the June half year.
But the company’s cost of doing business jumped by $85.8 million because of the Rivers purchase, as well as higher rental costs and wage rises and the investment of more than $15 million in omni-channel retailing (which means multiple retail channels including the internet (website sales) and linking those to stores.
Specialty Fashion bought Rivers Australia (the clothing and footwear company) for $3.9 million cash last November.
That purchase added $53 million to Specialty Fashion’s cost of doing business as the company was forced to discount Rivers products to clear them from the stores and cut excess levels of stock.
The deal will add stores (around 180) to Speciality’s 1000 store network comprising its Millers, Katies, Crossroads, City Chic and Autograph chains.
The company will pay an unchanged dividend of 2¢ a share, taking the full year pay out to 4¢ a share.
SFH 1Y – Rivers weighs on Specialty Fashion
Like Pacific Brands, Speciality has seen an upturn in retail sales in the early weeks of the new financial year.
Directors said yesterday that the positive sales momentum it had seen in the second half to June 30 had carried into the first few weeks of fiscal 2015 with its stores achieving positive comparable sales growth to date.
Second half comparable store sales jumped 5% year on year, after a 4.9% fall in the six months to December 31.
Gary Perlstein, Specialty Fashion Group’s CEO, said in yesterday’s statement: "After a disappointing first half a much stronger trading performance has been achieved in the second half of the year, with a record Mothers’ Day period. Investments made in our brands, in particular Millers, and our ongoing improvements in supply chain have meant we have managed to continue to increase gross margins despite an adverse exchange rate.
"A key focus in the second half has been the integration of Rivers and whilst we continue to make considerable progress, there is still significant work to be done as we rebuild the buying, planning and marketing teams, and business processes. We only expect an improvement in Rivers’ performance in the second half of FY15.
"We anticipate that our core strategies of continual business improvements and omni-channel growth will ensure ongoing benefits to the Group. We believe the key to success will be to compete for increased sales and improved margins through product differentiation and customer engagement of our brands rather than discounting prices. In addition, the Group is pursuing measured entry into certain retail markets beyond Australia that should provide growth opportunities for our brands," he said.
