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Specialty Fashion Group widens loss following brand divestments

Specialty Fashion Group’s divestment from a handful of retail businesses widened its net loss after tax in FY18 to $9.3 million, up from the $8.4 million loss it posted in FY17.

The company’s sole remaining brand, City Chic, performed relatively well, posting a 5.5 per cent increase in sales revenue to $131.9 million and net profit after tax of $15 million.

But this was not enough to outweigh the $24.3 million loss from the group’s Millers, Crossroads, Katies, Autograph and Rivers businesses, which it sold to Noni B Limited for $31 million cash in June.

“FY18 was a transformative year for the company, with the agreement to divest five of our six brands. The transaction provides the best possible outcome for our shareholders, significantly strengths the balance sheet, and provides the ability to focus on the growth and development of our City Chic brand,” Specialty Fashion Group chief executive Daniel Bracken said.

A rollout of standalone City Chic stores is underway, with a reduction in concession stores planned, while stores in the US and operations in South Africa have been successfully exited. The group is eyeing the US as a high growth online channel.

Online sales represented 36 per cent of City Chic’s total sales revenue in FY18.

Tight cost discipline and a larger contribution from the lower-cost online channel led to a decrease in underlying cost of doing business, dropping to 44.1 per cent of sales, compared to 48.9 per cent the year prior.

The group is forecasting improved sales growth across all channels in FY19, with online expected to be a major growth prospect.

The City Chic brand is expected to incur capital expenditure costs of up to $7 million in FY19 in its transition away from the group’s legacy systems and implements a standalone IT platform, alongside an investment in the store portfolio and e-commerce platform.

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