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RETAILER RCG Corporation (ASX: RCG) has announced a second profit downgrade in three months, blaming poor sales across all its brands in March and April and the pending arrival of Amazon.
Shares in the owner of Athlete's Foot, along with other brands such as Timberland, Vans, Dr Martens, Hype, Skechers and Platypus have dropped around 50 per cent this year after an initial downgrade in February of its full year guidance from $90 million to between $85 million and $88 million.
This second profit downgrade now puts full year underlying EBITDA guidance in the $74 million to $80 million range.
"The group's sales performance across all business units for the months of March and April combined, which are always taken together due to the movement in the dates of Easter and school holidays, have fallen short of management's expectations," says Hilton Brett, co-CEO of RCG Corporation.
"The market remains volatile and unpredictable and this makes forecasting future performance extremely difficult," he says.
Brett noted there had been a "significant drop" in the company's share price over the last few months and pointed out that directors controlled around 30 per cent of shares and are therefore "completely aligned with the broader RCG shareholder community".
RCG shares sank more than 27 per cent on Monday to a two and a half year low after the announcement and on Tuesday they rallied just over 5 per cent to $0.64 at around 12.30pm AEST.
The company's board says RCG has been caught up in a widespread sell down of retail stocks over the last few months due to several factors including weak consumer confidence, subdued wages growth, concerns around the housing market and the pending arrival of online retail behemoth Amazon.
The Australian retail sector is battling through some dark days with the demise of Dick Smith Electronics last year serving as a warning of what lies ahead for the sector.
This year, fashion brands such as Marcs, David Lawrence, Herringbone and Rhodes & Beckett have gone into receivership and the pending arrival of global players like Amazon is likely to squeeze local retailers even further.
Business News Australia
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