Specialty Fashion Group to cut over 300 stores

SpecialtyFashionGroupSpecialty Fashion Group will close over 300 stores as the company embarks on a “wide-ranging business program” focused on store rationalisation and accelerating its e-commerce channels.

At the company’s Annual General Meeting yesterday, shareholders voted against the retailers remuneration report, with 51.78 per cent against adoption resulting in a “first strike” that will culminate in a board spill should there be a protest vote again next year.

Over 34 per cent of shareholders also voted against the re-election of director Michael Hardwick who is also chief financial officer at rival fashion chain Cotton On Group (COG).

Despite SFG seeing an improvement in underlying EBITDA for FY17, the owner of brands including Katies, Millers and Riverse also reported an after-tax loss of $8.4 million, after accounting for one off costs of $8.8 million.

After battling challenging trading conditions in the first quarter of the new financial year, the company advised the market in mid-October that expectations for underlying EBITDA in FY18 would be lower than FY17 and in the range of $14.0 to $20.0 million.

“Whilst SFG has made strong progress on a number of operational issues, including completion of the successful implementation of a new ecommerce platform to maximise multi-channel migration, we are accelerating our speed in implementing the business improvement program in the face of continued market challenges,” said SFG chairwoman Anne McDonald.

SFG will turn its focus to trimming its store footprint, with loss making stores on ‘hold over’ leases to be culled to reach  the target of “an optimised store network of around 700 stores in 2020 compared to the current 1,000 plus stores.”

McDonald commented that the takeover bid from Al Alfia earlier this year had “required considerable time and focus” and affirmed the proposal did not result in an offer capable of being put to shareholders due to unexpected issues on Al Alfia’s side.

“We have re-engaged our search for additional non-executive Directors and during the next 12 months we aim to complete this stage of board renewal,” she said.

“As part of board renewal, Ashley Hardwick has advised he will not stand for re-election as a director of SFG at the next AGM. This is to align the NAAH [SFG’s largest shareholder and COG founder Nigel Austin’s private company] group’s board representation more closely to that of its shareholding.”

Outgoing CEO Gary Perlstein, who is retiring after 14 years in the role, said online sales now account for 10.4 per cent of total revenues and “continue to grow at impressive rates across all brands,” supported by newly launched e-commerce platforms.

“Our online growth reinforces our view that a critical pillar to the success of online sales is an integrated physical store and online experience and presence,” he said.

“Our CRM platform has in excess of 9 million members, which includes an email base of more than 5.5 million customers who we regularly communicate with. Connection with customers is core to our success, and we continue to work hard every day to improve and strengthen this.”

As a significant investor in SFG, I am a believer in the long-term opportunities for the business and I look forward to working with the board and the management team to ensure a seamless handover.”

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  1. Jeanette Bennett posted on November 22, 2017

    As a mid 50 year old woman I struggle to find fashionable clothing to fit my size 10 frame. Everything is drab, made for the obese population and from a fashion point of view doesn't even inspire my 88 year old mother! Katies have not evolved since I shop there in the 70's. Australian retailers deserve to be in the situation they are in today - constant discounting and lifeless experience equals no customers.

    • Frank Grasso posted on November 22, 2017

      Jeanette makes an interesting point but I am not sure I fully understand her argument. I am a 50-year-old man and I shop at Rod and Gun and RM Williams, in the 80's it was just Jeans - Should Katies be targeting 55-year-old women because they shopped there in the 70's? The discounting part I agree with, Australian retailers have to stop doing it I was in Tokyo last year there was nothing that was more than 10% of RRP.

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