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Retail Food Group flags increasing customer numbers in trading update

The easing of government restrictions related to COVID-19 continues to have a positive impact on foot traffic in shopping centres, according to a recent trading update from Retail Food Group (RFG), which has a significant mall presence through its Donut King, Gloria Jean’s and Michel’s Patisserie franchises.

Executive chairman Peter George said on Friday that “customer count has continued to improve, with recent trading data reflecting a weighted average decline amongst all brands of 13.76 per cent versus the prior corresponding period”.

This is an improvement from the 50 per cent decline in customer count that Donut King, Gloria Jean’s and Michel’s Patisserie stores were experiencing at the beginning of April, however, the numbers remain well below pre-pandemic levels, according to George.

RFG, which also operates the Crust, Pizza Capers and Brumby’s franchises, was hit hard by government restrictions intended to stop the spread of COVID-19.

Although cafes and restaurants could continue to operate on a takeaway-only basis, many franchisees said this was financially untenable and opted to temporarily close their stores, according to an RFG update in April.

At the time, the franchisor lashed out at landlords for only deferring rental payments, which is one of the highest fixed expenses for its franchisees, rather than reducing or waiving them.

Negotiations with landlords have improved in the interim, and RFG said on Friday that rent concessions had been obtained for around 415 outlets.

“This is a positive outcome for both franchisees and RFG which provides both cash-flow support and added certainty,” George said.

Seventeen outlets remain temporarily closed in Australia as a consequence of the pandemic, and seven are expected to close permanently. Internationally, around 138 outlets remain closed, 30 of which are permanent.

“These were forecast to close in the near future, and COVID-19 has simply expedited that outcome,” George said, in reference to the seven Australian outlets set for closure.

RFG’s unaudited underlying EBITDA for FY20 is expected to be around $35 million, assuming full contributions from all continuing operations, but excluding the impact of AASB15 and AASB16. Net debt is expected to be around $25 million.

RFG had previously been anticipating underlying EBITDA of between $42-46 million, but withdrew its guidance after COVID-19.

“RFG expects trading conditions to remain challenging in the foreseeable term and therefore anticipates a continuation of those measures implemented by the Group in response to the pandemic to support franchisees,” George said.

“That said, there are a number of positive developments within the Group’s businesses that provide optimism for the future.”

On Friday, RFG announced it had completed the restructure of its wholesale coffee business, which is expected to result in savings of around $6 million a year.

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