Specialty Fashion Group has become the second retailer to warn of an earnings slide this year - and it all comes down to its latest acquisition.
Specialty Fashion Group expects gross earnings to be between $21 to $23 million for the six months to December 31.
This is down from $31.2 million last year.
The 32 per cent slide is linked to an estimated $11 million loss from Rivers, which the company acquired for $3.9 million in 2013.
Despite this, other brands in the group recorded comparable sales growth of 5.7 per cent during the six months to December 31.
Total sales also jumped 27.4 per cent to $413 million during the half.
Group CEO Gary Perlstein said heavy discounting had impacted Rivers' performance.
“Continued discounting activity, whilst crucial to accelerate the improvement of the Rivers business in the medium term, has had a significant negative impact on our margins in the short term,” he said.
“Nevertheless, we remain confident that Rivers will make a meaningful contribution to the company’s profitability in future years, alongside our other brands.”
Specialty Fashion Group brands include Katies, Millers, Crossroads and City Chic.