Specialty Fashion gets first strike as it unveils plans to shut 300 stores

More than half of Specialty’s investors have voted against its remuneration report, as it flagged closing 300 stores by 2020.

Outgoing Specialty Fashion Group chief executive Gary Perlstein inside a Katie's store in Bondi Junction.

A majority of shareholders in retailer Specialty Fashion Group voted against the company’s remuneration report resulting in a ‘first strike’ at its annual general meeting today.

More than 50 per cent of shareholders voted against the remuneration report, which awarded outgoing chief executive Gary Perlstein a total of $845,100 and the company’s four non-executive directors $82,125 apiece, far in excess of the 25 per cent required for a first strike against the company.

If the company receives another strike next year, the board can be spilt.

The group also revealed plans to reduce its store footprint by more than 300 stores as subdued consumer confidence and increased competition weighs on the company’s sales.

In an address to shareholders, chairwoman Anne McDonald said the company (SFH) is taking actions to quickly reduce its store footprint, focusing on loss making stores on ‘hold over’ leases.

“We are targeting an optimised store network of around 700 stores in 2020 compared to the current 1,000-plus stores,” she said.

Specialty Fashion Group currently has a portfolio of 1,019 stores, across its brands Millers, Katies, City Chic and Rivers.

“We continue to pursue cost management initiatives and business simplification by integrating shared service functions into the brands. In the first quarter of the 2018 financial year, we have reduced costs by around $3.6 million through a leaner support office,” Ms McDonald said.

It comes after the company posted a full-year 2017 loss nearly quadruple the prior year to $8.39m, after a decision to exit its City Chic stores in the US triggered impairments.

Mr Perlstein, who announced he’d be stepping down last week after 14 years in the role, told shareholders that online sales now account for 10.4 per cent of total revenue, and online sales are continuing to increase across all brands.

“Our online growth reinforces our view that a critical pillar to the success of online sales is an integrated physical store and online experience and presence,” he said.

“In this environment, a disciplined approach to controlling costs and allocating capital to our most profit generating brands is imperative.”

Mr Perlstein said that a positive shopping experience, whether in store or online, is what customers want and would remain a focus of the company. He said the business would also invest in product selection and quality to ensure the company’s brands succeed in the “evolving retail environment”.

“Some brands have performed well this year,” he said.

“Others are working relentlessly to further transform their offers to deliver to the expectations of the modern customer.”