Retail Food Group profitable for the first time since 2017

Retail Food Group profitable for the first time since 2017

The owner of Gloria Jean’s, Brumby’s, Crust and more reported its first net profit after tax (NPAT) since FY17 yesterday on the back of coffee, bread and pizza sales even as COVID-19 restrictions hurt the Australian retail economy.

Gold Coast-based Retail Food Group’s (ASX: RFG) $1.5 million FY21 NPAT percolated after a loss of $4 million last year. However, it represents a dive from a $3.9 million half year profit it reported in February.

Overall, RFG’s same store sales grew by 3.2 per cent from FY20 to FY21, with standouts including Gloria Jean’s drive-thru outlets growing 17.8 per cent, Brumby’s Bakery up by 9.1 per cent, and the quick-service restaurant brands (Crust and Pizza Capers) experiencing 4.3 per cent growth, including an extra 600,000 pizzas sold.

The business lines most affected by COVID-19 during the 2020-21 financial year included the 590-store international division and RFG’s domestic coffee brands (Gloria Jean’s, Donut King and Michel’s Patisserie) primarily located in major shopping centres within metropolitan NSW and Victoria.

RFG executive chairman Peter George said the FY21 results were not unexpected given the trading conditions its eight retail brands and 750 domestic franchised outlets had to endure.

“The year’s results reflect periodic suppression of customer traffic in the major East Coast cities, store closures, and the challenges experienced by franchise partners who had volatile revenues but significant rental overheads,” George said.

“These have been tough and unavoidable trading conditions and we believe that hard-working franchise partners, strong brands and ongoing promotional support from RFG has kept the impact to a minimum and built a strong base for FY22.

“We are cautiously optimistic.”

The company's downturn in earnings for FY21 to $26.9 million was limited by a number of bright spots according to RFG including a 39 per cent increase in EBITDA for Brumby’s and Donut King’s 6.6 per cent growth in same store sales in non-metro regions.

During the financial year, the company invested in programs to support businesses at the store level, with new brand loyalty programs, product innovations and extensive marketing campaigns which included re-launching the Curst pizza business with $11 pizzas and a new $5 sides menu.

“Introducing entry-level pricing to a premium pizza range has proved very popular with consumers and we’ve seen this success reflected in same store sales,” said George.

“Over the past two years we’ve worked hard on becoming a more nimble, consumer-focused organisation and that has been an advantage to us as we’ve responded to changing consumer behaviour during COVID.”

He said RFG had also placed itself in a stronger position to respond to the challenges of FY21 by addressing financial and balance sheet issues in FY19 and FY20.

“We have significantly streamlined the company’s business, selling non-core assets and restructuring debt and overheads,” said George.

"It has allowed RFG to better pursue a ‘franchisee first’ business model, investing primarily in those things that drive successful stores: products, brands, marketing and support services.”

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