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Retail Food Group shares plunge 9% as workers stood down

The Retail Food Group Limited (ASX: RFG) share price has plummeted more than 9% this morning, as the group becomes the latest ASX company to stand down workers as a result of the coronavirus pandemic.

Shares in the franchise operator have plunged by more than two thirds since February and are now trading at just 3 cents. 

Workers stood down

Retail Food has implemented a reduction in total working hours across the group by either standing down, or reducing the working hours of the majority of its team members. The company said additional operational and workforce planning measures were necessitated by the rapid escalation of measures by Australian governments to slow the spread of coronavirus as well as the current uncertainty regarding the duration and impact of the pandemic on its operations. 

Retail Food Group owns a host of food franchises including Michel’s, Gloria Jeans, Crust, Donut King, and Brumby’s. The company also roasts and supplies coffee products under its Di Bella Coffee brand. The group said today’s decision was made to safeguard as many jobs as possibly over the longer term and preserve and protect the sustainability of the franchise network. 

Operational performance 

From an operational perspective, Retail Food advised that Brumby’s performance has continued to exceed expectations over the past few weeks. Recent trading data, however, indicates a significant reduction in customer count across the group’s domestic franchise network. Those outlets situated in shopping centres have been the most acutely impacted by the community response to the coronavirus outbreak and increasingly stringent measures by governments to combat it. 

There is a strong link between Retail Food’s performance and that of its franchise network, which has been impacted by rapid change in the retail market. 

Executive Chairman Peter George commented:

A large majority of our franchise partners are facing an extremely difficult trading environment, particularly within shopping centres, as consumers react to increasingly onerous measures taken by the government, and of course are focused on more immediate issues such as their and their family’s health and safety.

Retail Food said it was necessary to make a long term and pragmatic approach to best assure the future sustainability of its franchise network for all stakeholders. It said it was necessary to ensure its costs were reduced to match anticipated revenues for the foreseeable future, and to best position the group and its franchise network for a return to less challenging times. 

The company said it remained focused on providing support to its franchisees, including financial assistance to those that require it most. It is continuing to monitor actions taken by governments in the markets it operates in and the potential impact on the business. 

George said, “where it is necessary to take additional action to further insulate the Group and its franchise community from this rapidly evolving situation we will do so.”

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. 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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