Country Road Group suffers $79m brand impairment in year to forget

Country Road Group could be on track for its first annual loss in decades after resorting to an accounting impairment against the value of its fashion brands such as Trenery, Witchery and the namesake Country Road chain.

Country Road has reported a sharp fall in sales over 2025. Picture: AAP Image/Paul Miller

Troubled fashion house Country Road Group, owned by South Africa’s Woolworths Holdings, wrote off the value of its fashion stable Country Road, Mimco and Witchery by as much as $79m.

It could be a precursor to the group’s first loss in decades when Woolworths Holdings files its full set of accounts in September.

Sales for some of Australia’s most cherished fashion brands have slumped, with Country Road Group reporting on Thursday that same-store sales declined 6.8 per cent for the 52 weeks to June 29 amid conditions it has described as recessionary. These reflect cost-of-living pressures and deep discounting in the sector to shift unwanted stock.

But the immediate pain for its owners will come from a review of the carrying value of the businesses it took control of in 2014 when it paid more than $213m to buy out minority investors in the fashion house. One of those was billionaire retailer Solomon Lew.

“The impact of a weaker topline environment coupled with diluted gross profit margins as a result of inflated import costs and increased discounting, amplified the degree of negative operational leverage in Country Road Group’s second half, in turn significantly impacting the Group’s overall result for the period,” Woolworths Holdings said.

Country Road Group is likely mired in losses after a $78.9m impairment. Picture: AAP Image/Paul Miller

Woolworths Holdings told the market in a trading update for fiscal 2025 that following its assessment, it recorded a non-cash impairment charge of 917 million rand ($78.9m).

In 2024, Country Road Group reported an adjusted profit of $51.3m, down 66 per cent on 2023. Assuming this level of profitability were sustained, it would be deeply mired in losses factoring in the write-down.

Earlier this year, Country Road Group reported a more than two-thirds slump in its December half earnings, with its South African parent signalling at the time it would investigate if it needed to impair the brand assets in the wake of its poor trading.

Some the losses borne by Country Road Group have come from its separation from department store David Jones, which was also bought by Woolworths Holdings in 2014, for a ring-the-bell price of $2.1bn and later sold to private equity firm Anchorage Capital for just $100m in December 2022.

The split from David Jones shifted costs previously shared by both operating businesses onto the shoulders of Country Road Group.

The Thursday trading update reported Country Road Group had completed a significant restructure to reconfigure its operating model and reset its structural economics as a stand-alone business.

But this came at a cost, Woolworths Holdings said.

“This transformation was undertaken in an accelerated time frame and within a particularly unconducive macro backdrop whereby sustained pressure from high interest rates and living costs continued to impact consumer footfall and spend.”

Sales for Country Road Group declined by 5.4 per cent for fiscal 2025 and by 6.8 per cent on the aforementioned same-store basis.

Country Road has reported a sharp reduction in sales over 2025. Picture: Britta Campion / The Australian

However, trade in the fourth quarter improved significantly, declining by 0.3 per cent on the prior corresponding period, and minimising the broader second-half decline to 4.5 per cent.

This revival was led by the Country Road and Trenery brands.

Melbourne-based Country Road Group was plunged into a sexual harassment and workplace bullying scandal last year that resulted in two highly placed executives departing and staff morale sinking. It led to further staff departures and redundancies with the company also recently announcing the closure of its Country Road store at the Queen Victoria Building in Sydney and the flagship in the city’s Pitt Street Mall when the lease expires in about 2028.

This month The Australian reported Country Road Group was yet to fill more than 50 vacant roles at its headquarters as cost cuts and store closures plague the iconic casualwear business. Country Road would also leave the ritzy Melbourne suburb of Armadale where its knitwear and branded canvas accessories were once at home, amid cost cutting to cope with the worsening retail conditions.

Originally published as Country Road Group suffers $79m brand impairment in year to forget