Investors savage Retail Food Group shares

Investors savage Retail Food Group shares

Investors have punished Retail Food Group (ASX: RFG), sending its share price 50 per cent lower at its worst point, after its announcement of massive losses and the closure of up to 200 stores.

After RFG came out of a two day trading halt, investors rushed for the exit and at around 1.30pm AEDT, its shares had recovered to be down 35 per cent to $1.32. At one stage the price plunged by half to $1.055, just after the open.

RFG went into the trading halt because of a dispute with its auditors last week and, as a result, its half yearly results were delayed until Friday.

They revealed plans to close up to 200 outlets on the back of a net loss after tax of $87.8 million, compared to $32.7 million profit in the previous half year and $138 million in writedowns in the value of its brands.

RFG, which operates food franchises such as Donut King, Gloria Jean's Coffee and Pizza Capers, Crust Pizza and Michel's Patisserie, cited "challenging trading conditions" while acknowledging its own "disappointing performance" as it outlined its business-wide review to turn the company around.

As part of the business-wide review, RFG says it will close between 160 and 200 outlets as the company negotiates rent decreases on its "unsustainable" stores.

The company says it is also aware that it needs to improve the support it provides to its franchisees.

Retail Food Group is facing the potential for a class action over its relationship with franchisees following a report from Fairfax Media which scrutinised dealings with the franchisees under its brands.

Bannister Law says it is investigating the class action because of a number of concerns raised by a multitude of franchisees, including the terms of operation, and contributions made by the franchisees including, but not limited to, marketing fees.

 

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