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Specialty Fashion Group cuts expectations with guidance

SpecialtyFashionGroupSpeciality Fashion Group (SFG) CEO Gary Perlstein believes its “too early” to say whether weak trading in the first quarter will carry through to a lacklustre Christmas period after the company slashed its earnings guidance on Wednesday.

SFG has advised the market that that it expects first half earnings before interest, tax, amortisation and depreciation (EBITDA) to be between $14 – 17 million, around half that of last year, amid a continuation of the “difficult trading conditions” that led to its $8.39 million loss in FY17.

The company has been struggling with increasing promotional intensity and a subdued consumer environment as late, with gains at City Chic and Rivers in FY17 being offset by declining comparable store sales at its core apparel brands.

Perlstein, who said at the company’s full-year result in August that Christmas trading would be vital for the FY18 prospects of its troubled brands, is unsure whether conditions will abate enough to deliver growth over the crucial period.

“You could say that the trend will continue and that the general softness will make it difficult, or that pent-up demand from consumers not having spent as much as one would have thought [might] come back strong – it’s too early to call,” Perlstein told Inside Retail.

Perlstein confirmed that the core brands continue to trade poorly, driving the most recent trading update, but that he remains “optimistic” about his omnichannel plan for the company and the progress of City Chic and Rivers.

“We’re very focused on improvement and are confident in our strategy,” Perlstein said. “We’re optimistic about the business despite it having a difficult run.”

Perlstein laid out a revitalisation plan for its core brands at the full-year that’s combining investment in online with an aggressive store consolidation plan and a move away from aggressive discounting to preserve margins.

SFG is slated to bring its total store network below 1000 across FY18, which could involve the closure of more than 44 stores depending on landlord negotiations.

Perlstein said today that those negotiations had been successful and consolidation plans were being accelerated as a result.

“We’ve made good headway, it’s obvious that the sector needs recalibration and I think everyone understands that,” Perlstein said.

SFG isn’t the only retailer undertaking negotiations with landlords to consolidate its store portfolio, with others including Premier Investments, Billabong International and Myer all indicating plans to enter negotiations of their own in recent months

“[Landlords] are looking at their numbers and seeing it for themselves…it’s that obvious,” Perlstein said.

He also indicated that the launch of a new ecommerce platform would drive further progress in digital as the business moves past the trading disruption caused by the updates.

SFG’s share price sank 12 per cent to 22 cents in the hours after the announcement, bringing its total decline since January to more than 50 per cent.

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