RCG announces second profit downgrade
The Athlete’s Foot owner, RCG Corporation, has announced a second profit downgrade in three months, blaming a widespread sell-down of retail stocks for the recent drop in its share price.
The shoe merchant’s shares plunged 27.1 per cent on Monday, hitting a two-and-a-half-year low following the disappointing trading update that cut the group’s full-year earnings guidance for a second time this year.
The retailer says housing market concerns, subdued wage growth and the pending arrival of Amazon have made investors nervous about the retail sector.
“The board believes that RCG has been caught up in the widespread sell-down of retail stocks over the last few months due to a number of factors,” the company said in its trading update on Monday.
It said those factors included declining consumer confidence, weak wage growth, housing market concerns, rising interest rates and the “perceived impact that the market entry of Amazon may have on the Australian retail landscape”.
The company said it wanted people to note that its directors have a combined 30 per cent stake in RCG.
RCG’s share price began the year around $1.49 and was at 83 cents by the end of April – a 44 per cent slide in four months before Monday’s plunge.
The company also reassured the market that the former owners of its Accent business, which houses Platypus, Vans and Dr.Martens, will not sell their shares when their escrow expires on May 27.
“Those former owners who are directors of RCG have confirmed that they have no intention of selling shares into the market at these levels,” it said.
RCG expects earnings before interest, taxes, depreciation and amortisation (EBITDA) to be in the range of $74 million to $80 million for 2016/17, down from its February guidance of $85 million to $88 million.
“The subdued trading performance in the March/April period, together with a more cautious outlook for the remainder of the financial year, has resulted in RCG revising its full-year annualised, underlying EBITDA guidance to a range of $74 million to $80 million,” the company stated.
RCG attributed the downgrade to softer shoe sales, including flat like-for-like sales during March and April for its Accent and Hype businesses, and flat like-for-like sales for the year to date at The Athlete’s Foot.
It also defended the integration of its bricks and mortar stores with its online outlets across its TAF, Platypus, Hype, Skechers, Vans, Merrell, Saucony and CAT brands.
It said e-commerce sales had risen more than 65 per cent and the growth continued to accelerate.
Shares in RCG ended at 60.5 cents, down 22.5 cents with more than 30 million units having been traded.
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