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Here’s why the Retail Food Group Limited (ASX:RFG) share price fell 54% in March

The Retail Food Group Limited (ASX:RFG) share price fell a whopping 54% in March, its share price closing the month at 93 cents.

The selloff came after the beleaguered company reported underlying profit fell 32% to $25 million, with Retail Food Group cancelling its dividend in order to conserve cash.

RFG is undertaking a comprehensive business-wide review,  initiated in response to poor trading results which were impacted by ongoing challenging retail market trading conditions, especially within increasingly competitive shopping centre locations.

There seems to be no obvious quick fix for Retail Food Group, with the company recognising that retail trading conditions, especially in shopping centres, will remain challenging for the foreseeable future. As a consequence, RFG needs to improve the support it provides to its franchisees.

Adding to its woes, last month UBS revealed that its analysts had downgraded the embattled food and beverage company’s shares to a sell rating from neutral, with a price target of 90 cents. The broker said RFG’s half-year results were weaker than it expected and it has concerns that its new banking covenants will be difficult to comply with.

Retail Food Group has a market capitalisation of around $170 million. Over the past 12 months, the RFG share price has lost 81%. This compares unfavourably to the 0.88% fall in the S&P/ASX 200 Index over the same period.

Bruce Jackson is the founder of The Capital Club. This article was originally published here

Bruce Jackson does not have a position in any of the companies mentioned in this article. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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