Retail giant Specialty Fashion Group (SFG) has hinted that mass store closures may be on the cards, following a revenue drop of 0.5 per cent for the first half of the 2012 financial year.
The company, which today released its guidance for the six months to December 31, 2011, recorded a revenue figure of $307 million, with comparable store sales down 4.5 per cent compared to the previous corresponding period. EBITDA for the first half of the year is expected to be within the range of $21 million to $22 million.
According to SFG chief executive officer Gary Perlstein, the results reflect the group's disappointing Christmas trading period, with sales for December on a comparable basis also lower than last year.
He also revealed that the group would be reviewing its physical store portfolio over the next three years as a result.
“The group has increased its portfolio to 909 stores at December 31, 2011, following the opening of 24 stores and the closure of six stores during the half year. [Going forward] Specialty Fashion Group may open new stores in strategically important locations, however, it will be rationalising its store portfolio to take advantage of the costs of doing business,” he said.
“The number of stores close or recalibrated in size will depend on whether the rental costs decrease in line with the cost structure associated with running an online business. The company expects that if the current trading conditions continue and rental remain at their current levels, around 120 stores in the current portfolio will be rationalised over the next three years.”
However, Perlstein said that despite this, SFG expects to bounce back during the second half of the 2012 fiscal year, with plans in place to boost online operations and recalibrate the business overall.
“Given that this is the toughest retail environment we have seen, Specialty Fashion Group has performed well. We have a strong balance sheet, and we are very clear about the strategy required to navigate our way through the structural changes that are taking place within the retail industry,” he said.
“This is a once in a generation opportunity to recalibrate our business to achieve a more sustainable cost structure that for too long has been under pressure from rising wage and rental costs. It is also a very exciting time to capitalise on new technologies to reinvigorate the consumer.”
Perlstein said online sales for the group tripled in comparison to the first half of the 2011 financial year. As a result, he said SFG will be placing particular focus on aggressively driving online growth through its brands, as well as the launch of a new online business by mid-2012.
“The group is targeting to achieve a 15 per cent of sales online over the next three years,” he said.
“A multi-branded platform is being exclusively developed with rollout planned for March 2012, which will dramatically improve the functionality of the brand's online stores across multiple devices, and it will be fully integrated with the new customer relationship management platform.”
By June 2012, the group is also aiming to launch a multi-brand womenswear business that will feature local and global brands.
In addition, Perlstein said SFG will look to pursue opportunities to expand the brand's presence online, both locally and internationally, through aggregators such as Ebay's Fashion Gallery.
He added that SFG's long-term strategy, will also include a transformation of its supply chain, improvements to purchase commitments, and the roll out of a first tier planning system to be completed by April 2012.