Specialty Fashion Group has brought on ex-Myer deputy chief executive Daniel Bracken to replace Gary Perlstein as its new CEO and managing director, as declining earnings have pushed the business to laying off staff.
SFG has booked $18.5 million in earnings before interest, tax, depreciation and amortisation (EBITDA) for the six months ended December 31, up on its $14 – 17 million guidance range, but down 39 per cent on HY17.
The fashion giant said on Friday morning that sales across its legacy brands, Katies, Crossroads and Millers, were negatively impacted by promotional activity and poor product selections early in the half, while Rivers suffered from weakness in its menswear range.
Group-wide sales decreased by 7.2 per cent from the prior corresponding period to $399 million, while comparable store sales declined by 3.3 per cent, despite an improvement during the second quarter.
First-half earnings were impacted by restructuring costs of $1.6 million, associated with support office redundancies and provisions for an acceleration of a plan to close stores, with 67 closed during the period.
$14.4 million in underlying costs was saved during the half amid cost management initiatives, including $6.4 million in annual costs associated with the “leaner support office”.
Incoming chief Bracken, who was also Myer’s chief merchandise officer, will also inherit an improved inventory position, after work was conducted during the first-half to improve buying practices and remove unproductive ranges.
Bracken said that he’s aware of the issues facing the business but believes SFG’s legacy fashion brands have an opportunity to capture the “under serviced” plus-sized end of the market.
“I’m very happy to roll my sleeves up and get to the hard graft…[and] I’m really happy to be back in specialty retail, it’s my first love,” Bracken told Inside Retail on Friday morning.
“The brands themselves present their own opportunities for the future in very different ways.
“They’re generally playing in an under-serviced end of the market, and generally with limited international entrants and competition in my view, there’s a great opportunity to [capture] a greater part of the pie,” he said.
The now-former Myer executive has more than 25 years of experience in retail, having previously served as the CEO of competitor APG & Co (Sportscraft, JAG, Saba) and as a vice president of strategy for Burberry in the UK.
SFG chairperson Anne McDonald said Bracken would bring “passion, energy and deep experience of developing successful apparel brands” to the struggling business.
McDonald offered no update on the status of indicative purchase offers for the business, one of which is associated with Perlstein, but did say the group had made good progress on its objective of transforming the business amid a structural review.
“In a competitive retail environment, good progress was made towards our objective of building a platform for profitable, sustainable growth and transforming the business into an agile omnichannel retailer with a strong and visible presence online and on high street,” McDonald said.
SFG’s online sales revenue grew by 14 per cent in the first-half and now represents 12.3 per cent of total revenue.
Second-half priorities
Bracken said one of his most immediate priorities when he starts next Monday will be ongoing negotiations with landlords to close around 300 stores in the next 12-18 months.
He said it is too soon to comment in detail on his other priorities for the business, but did say that getting brand, customer proposition, instore experience and online right would be points of focus.
“There’s no doubt that it’s a tough retail market, but equally there are winners and there are losers, it’s about remaining relevant,” Bracken said.
Addressing the impact discounting has had on SFG’s business, including over the last half, Bracken said addressing gross margin, which fell by 2.1 per cent on the prior period in the first-half, would be a priority in 2H18.
The lean structure underpinning SFG’s strongest brand, City Chic, which booked strong growth at home and abroad in the first half, have now been integrated into the Autograph brand, which SFG said was delivering margin improvements.
SFG also last week launched a collaboration with Toll to bolster its ecommerce offer, making its delivery model faster and more efficient.
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