Specialty Fashion expects earnings before interest, taxation, depreciation, and amortisation for the six months to December 31, to be between $21 million and $23 million, down from $31.2 million last year.
The slide is linked to an estimated $11 million loss from Rivers, which the company has been trying to turn around after buying it for just $3.9 million in November 2013.
Specialty Fashion CEO, Gary Perlstein, said the company’s other businesses, which include the Katies and Millers chains, had performed well but heavy discounting had hurt Rivers.
“Continued discounting activity, whilst crucial to accelerate the improvement of the Rivers business in the medium term, has had a significant negative impact on our margins in the short term,” he said.
“Nevertheless, we remain confident that Rivers will make a meaningful contribution to the company’s profitability in future years, alongside our other brands.”
Excluding Rivers, Specialty Fashion recorded comparable sales growth of 5.7 per cent during the six months to December 31, while total sales jumped 27.4 per cent to $413 million during the half.
Specialty Fashion shares had climbed four cents, or more than five per cent, to 75 cents as of 1030 AEDT.