Country Road Group-owner Woolworths Holdings last week reported its interim results, revealing that the Australian retail group had more than a two-thirds slump in its December half earnings. Country Road Group posted a 71.7 per cent drop in adjusted operating profit year-on-year to $14.2 million – its sales declined by 6.2 per cent year-on-year and by 7.8 per cent on a comparable-store basis. The Black Friday and pre-Christmas sales period were not enough to make up for a harsh retail environ
nvironment, a messy separation from David Jones and a hangover from bad publicity.
Now, Woolworths Holdings is looking to investigate the carrying value of each of Country Road Group’s Australian retail chains, which include Country Road, Witchery, Mimco, Trenery and Politix.
A harsh environment
Woolworths Holdings attributed the reduction in Country Road Group’s store traffic to Australia’s persistent tough trading conditions and promised to take this into account as it audits each brand.
“In Australia, whilst a gradual recovery in GDP growth, alongside easing monetary policy is expected, the retail sector is likely to remain highly promotional until such time as the pressures of living costs ease,” Woolworths Holdings stated in its half-year earnings report.
“During the second half of the financial year, we will undertake a reassessment of the carrying value of the assets of our underperforming brands within the Country Road Group. This exercise will give due consideration to the macroeconomic environment, our strategic plans and our reset operating model.”
Even with the recent cut in interest rates by the Reserve Bank of Australia, Woolworths Holdings isn’t confident it will be enough to turn sales around in the near future.
A messy divorce
Moreover, Country Road Group is still finding its feet after its separation from David Jones last financial year.
“Following the sale of David Jones in the 2023 financial year, and the successful separation of Country Road Group from David Jones in the 2024 financial year, Country Road Group is currently in the midst of a significant restructure to reconfigure its operating model and reset its structural economics as a stand-alone business,” Woolworths Holdings said.
The split caused operational and financial problems for the Country Road Group brands as they took on more costs – motivating Woolworths Holdings to accelerate the restructure.
A PR hangover
However, it’s hard to separate the drop in sales at some of Country Road Group’s brands in the December half from the public scandals that have plagued its flagship brand, Country Road, over the past year.
Early last year, the heritage Australian retailer came under fire for sexual harassment and workplace bullying allegations – the already tense work environment was not handled smoothly by the investment holdings company.
Woolworths Holdings chief executive Roy Bagattini flew to Australia after the news broke and held a crisis staff town hall meeting to address the mishandling of staff complaints.
“I am talking about the ecosystem: the line managers failed the system, HR certainly failed the system,” Bagattini said at a staff meeting at Country Road Group’s Melbourne headquarters, according to The Australian. The comment reportedly earned rowdy disagreement from attendees.
Staff in attendance reportedly felt that Bagattini was shifting the blame to employees and the victims, rather than Country Road Group leadership.
Against this backdrop of declining sales, ongoing restructure and looming review of the value of the group’s brands, a new leader is set to take the helm of Country Road.
Sergio Rossi CEO Helen Wright has reportedly been appointed as the brand’s new boss, according to the Australian Financial Review. This follows the departure of its managing director Elle Roseby last year.
Last August, Country Road Group reportedly appointed former Levi Strauss executive Nicolas Versloot to lead its namesake brand temporarily.