Specialty Fashion wrings changes amidst internal shakeup

Specialty Fashion Group ASX SFH CEO Daniel Bracken

Fashion retailer Specialty Fashion Group (ASX: SFH) has revealed its laundry list of corporate changes as part of an ongoing efficiency drive at the embattled retailer.

Specialty has seen its share price in consistent decline amidst tough market conditions over the past 18 months and experiencing declining sales and revenues across all its retail brands.

The worsening situation came to a head last month, with Speciality forced to publish a market update titled ‘media speculation’ in a bid to stem swirling market rumours about imminent restructuring, and citing “a number of confidential, non-binding, indicative proposals for a change of control of the Group or the acquisition of certain brands,” as reason to launch a structural review.

The structural review and all future strategic decisions are to be led by newly-appointed CEO Daniel Bracken, former deputy-CEO at Myer, one of Australia’s largest retailers. His role will commence later this month.

In the interim, soon-to-be-former CEO Gary Perlstein is expected to step down from his post on February 15th, 2018 with the conclusion of Specialty’s internal restructuring enabling the fashion business to recover its retail mojo and rebuild market share after years of erosion by fresher brands.

According to Specialty, the measures it intends to implement in order to reverse its fortunes will include a reduction in store numbers, simplifying distribution and its inventory management, as well as, putting more focus on its most commercially viable brands such as Millers, Crossroads and Katies, which are showing improved margins.

Not so special results at Specialty

The financial metrics published by Specialty today make for grim reading.

Underlying earnings before interest, tax and amortisation (EBITDA) for the first half of 2018 was $18.5 million compared to $30.4 million over the same period in 2017 – a 39% decline.

Total revenue generated in the first half of 2017 was $399 million compared to $430 million in the first half of 2016, falling 7.2% in both online and high-street channels.

Net profit for the half year was $3.1 million compared with $12.1 million a year ago, equating to a grisly year-on-year decline of 74%.

The severe deterioration in company performance is expected to be the first port of call for Mr Bracken as he prepares to take up his role and begin the turnaround project at Specialty later this month.

Despite the poor financial results, today’s news of a veteran retail-sector CEO taking the reins at Specialty was received positively by market participants with Specialty shares rising 11% by the afternoon session on the ASX.

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