As COVID-19 restrictions ease, Gold-Coast based Retail Food Group (ASX: RFG) is reaping the rewards of increased traffic to its brands like Michel’s Patisserie, Gloria Jean’s and Donut King in large Australian shopping centres.
While the group reported a 10.1 per cent increase in domestic customers across its network, the overall turnout remains below pre-COVID levels. However, the average transaction is up by almost 20 per cent.
Despite the positive momentum, which also includes an uplift in RFG's pizza businesses, the group's forecast FY22 EBITDA of $21.4 million is around 40 per cent of pre-pandemic earnings.
Over recent months, customer traffic has grown by 17.3 per cent compared to the December half for bakery chain Michel’s Patisserie, followed by 14.2 per cent for coffee restaurant Gloria Jean's and 13.4 per cent for Donut King.
The news comes four months after the group reported a 31.4 per cent rise in profit despite the outbreak of Delta and Omicron, which saw its customer count decline by more than a quarter in the December half.
RFG executive chairman Peter George said last week’s same-store sales were the highest achieved in the past two years.
“Performance of the group’s pizza brands, Crust and Pizza Capers, has been particularly satisfying. Both brands’ FY21 momentum has been sustained with strong FY22YTD SSS growth of 10.8 per cent (Crust) and 6.3 per cent (Capers) versus the prior corresponding period.”
While 26 international outlets have closed during the second half, it was offset by the opening of 37 new outlets. A further net outlet growth of five stores is anticipated by the end of the month.
“The various positive indicators observed across the Group’s business during the 2H22 provides confidence that RFG continues to tread the right path in its turnaround journey, although with a clear appreciation of the challenging trading environment that continues to exist”, George said.
“The network is yet to return to optimum trading levels. Lost trading days and hours attributable to a robust labour market and ongoing COVID isolation protocols continue to weigh on performance.
“We are closely managing inflationary pressures on our supply chain, albeit these have had relatively limited impact to date. There also remains a risk of heightened store closures attributable to sustained COVID related trading pressures occurring earlier in the year, particularly in NSW and Victoria."
Even though RFG has seen a rapid rise in the average spend of its customers, up 7.8 per cent year-on-year in the current half-year so far, George indicated a long runway for growth.
"Whilst we have significantly increased average basket size for our Franchise Partners over the past three years, ATV remains relatively low and therefore gives us scope and flexibility to better compete and more effectively manage retail prices in a challenging trading environment," he said.
Michel Patisserie class action update
RFG also confirmed there has been no material progression in the Michel’s Patisserie class action lawsuit, which remains in the early stages.
“The applicant is required to file a statement of claim precisely outlining and particularising her allegations against the company by 15 August 2022,” RFG said.
"Separately, the applicant’s interlocutory application seeking approval of funding arrangements, which is opposed by RFG, is listed for hearing on 20 October 2022. A number of procedural matters have been progressed in the ACCC matter.
“RFG has filed an application seeking certain orders as to the future conduct of the proceeding, which it considers will substantially narrow the scope and thereby increase the efficiency of the proceeding in a manner consistent with the parties’ overarching obligations to the court. The ACCC has opposed that application. It is anticipated that the application will be heard in August or September 2022.”
Enjoyed this article?
Don't miss out on the knowledge and insights to be gained from our daily news and features.
Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.
Support independent journalism and stay informed with stories that matter to you.