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Why did the Retail Food Group share price jump 24%?

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The past year has been a bit rough for Retail Food Group Limited (ASX: RFG) shareholders who have seen the value of their shares sink by more than 85% over that period. But the recent surge in the Retail Food Group share price may have seen as many scratching their heads as celebrating. The Retail Food Group share price was trading at around 40 cents last week but is now up to about 67 cents, representing a gain of more than 50%.

What happened?

Essentially, with no news out of the company, it’s difficult to say.

In June, Retail Food Group announced it expected to record a net loss of $87.6 million for FY 2018. The company’s share price, already hit by news of debt problems, continued to drop following the news. Since then, Retail Food Group appears to be pursuing measures to help its ailing business recover. Aside from apparently manging to get bankers to ease off the trigger, Retail Food Group has reportedly engaged consultants to help rescue the company. It’s a move that could eventually see Retail Food Group selling off assets which currently include Donut King, Brumby’s Bakeries, Michel’s Patisserie, and Crust Gourmet Pizza Bar.

The company’s declining share price over the past year coincides with healthy gains notched up by competitors Domino’s Pizza Enterprises (ASX: DMP) and Costa Group Holdings Ltd (ASX: CGC), demonstrating that there is money to be made in the sector. As such, it is possible that investors have targeted the Retail Food Group’s price drop as an opportunity and are confident management can get the company back on its feet. And perhaps the recent reshuffle of the company’s key players, which saw Andre Nell leave his position as managing director and Richard Hinson step up to the position of Group CEO a few months ago, has added to that sense of confidence. At any rate, more should be known when the company releases its results, expected next week.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. 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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