Written on the 20 December 2017 by Paris Faint


RETAIL Food Group (ASX: RFG) shares have continued to freefall today following the company's trading update earlier in the week which shaved $11.5 million off its half-year profit guidance figure.

After the announcement was made on Tuesday that RFG adjusted its 1H18 guidance from $33.5 million, the company's share price fell by more than 20 per cent.

RFG is the company behind brands including Donut King, Brumby's Bakery and Pizza Capers.

During trade on Wednesday, shares plummeted a further 17.9 per cent to dwindle at $1.62, a shadow of its former September 2016 share price of $7.20.

RFG has been in decline since early November, however the sharpest drop came on 11 December following a Fairfax Media investigation into the company which reported it was crippling its franchisees in both a fiscal and personal sense.

Fairfax has reported that hundreds of RFG branded stores have closed within the past year, and it estimates that at least 200 stores are currently listed for sale either on job website Seek or in Chinese newspapers.

Fairfax estimates that around 17 per cent of Gloria Jeans stores are currently listed for sale, while Pizza Capers listings have hit 25 per cent.

In the 10 days since the report was first released, RFG shares have more than halved.

As part of its trading update this week, RFG said media allegations regarding franchising contributed to a "noticeable decline in momentum".

RFG shares have been falling steadily since January.

RFG has since rejected the accusations made by a number of franchisees in the Fairfax report, saying that its financial and operational performance was not "accurately reflected" in the coverage.

"The Company's current strategy, management team focus on responding to challenging retail market conditions, including efforts to support its Franchise Partners and their team members, and its financial and operational performance, all of which have previously been announced by the Company, are not, in the Company's view, accurately reflected in the Fairfax Media's coverage," said RFG in a statement to the ASX on December 11.

RFG also denied claims that it was not supporting its franchisees.

"We reject this assertion and reiterate the fact that our success depends on the success of our franchise partners," said the company.

Today's share price refers to the time of update (3:53pm AEST).

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Business News Australia

Author: Paris Faint





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