Country Road Group profits tumble

The retailer’s profits have sunk following a high profile workplace scandal at the Australian chain and dropping consumer confidence.

Scandal-plagued retailer Country Road Group has suffered a two-thirds dive in its full-year profit as the fashion and apparel house battled near record-low consumer confidence levels and a pullback in consumer spending.

On Wednesday Woolworths Holdings issued its annual results to report Country Road Group’s adjusted operating profit of $51.3m for the 53 weeks to June 30 decreased by 66 per cent, returning an operating profit margin of 4.6 per cent compared to 12.4 per cent in the prior corresponding period.

The trading environment is worsening for Country Road Group, with its sales for the first eight weeks of fiscal 2025 sliding 11 per cent.

The retailer, owned by South Africa’s Woolworths Holdings, has been thrust in a workplace behaviour scandal this year which has seen accusations of bullying, sexual harassment at its Melbourne headquarters and the ejection of key executives.

Despite the scandal swirling around the Australian-based retailer — which was the subject of an external investigation by lawyers — the South African owners have decided to extend the tenure of its chief executive.

Country Road Group’s labels include Country Road, Trenery, Mimco, Witchery and Politix.

Announcing its annual results overnight, Woolworths Holdings said it had decided to extend the contract of group chief executive Roy Bagattini.

“As previously reported, Roy Bagattini, the Group’s chief executive officer was employed on a fixed-term contract. The board is pleased to announce that Roy’s employment has been extended with no specified end date,” the company said in a statement.

Mr Bagattini had been forced to fly to Australia from his South African base a few times this year to deal with the bullying and sexual harassment scandal at Country Road Group, addressing angry staff who openly and loudly vented their anger at a recent staff meeting.

In what was already a supercharged environment in the wake of allegedly improper workplace behaviour stretching back to last year, Mr Bagattini — who said at the June meeting it was the “lowest point in the company’s history” — faced an open staff revolt at the fashion house.

At the meeting Mr Bagattini refused to divulge if Country Road Group boss Raju Vuppalapati had faced any financial or disciplinary punishments for the upheaval under his watch.

The results come as Country Road Group staff prepare for a restructure which is expected to see dozens of jobs stripped out of the retailer while workplace consultancy firm Bendelta works at the company to help repair its shredded staff morale and corporate culture.

“Retail trading conditions in Australia and New Zealand deteriorated further in the second half, with consumer sentiment at near-record lows, and household savings the weakest since the GFC,” Woolworths Holdings said.

Woolworths Holdings has warned the pace of macro recovery in Australia was likely to prove more protracted than initially envisaged.

Country Road Group — which includes labels Country Road, Mimco, Trenery, Witchery and Politix — said sales for the 53 weeks declined by 6.8 per cent on the prior period. On a comparable 52-week period, sales declined by 8 per cent and by 13.1 per cent in comparable stores, following the double-digit decline in retail foot traffic.

Woolworths Holdings said higher promotional activity to manage inventory levels, and the impact of a weaker Australian dollar on input costs, resulted in a 230 basis point decrease in gross profit margin to 60.3 per cent.

The company said sales in the second half fell by 11.3 per cent. The company also booked an impairment charge against its Politix retail chain.

It said its Country Road brand delivered its best sales growth on record with positive sales growth.

The softening sales momentum and profit dive for Country Road Group comes amid worsening conditions for the fashion and apparel sectors. Investors will get a better sense of the pain in the sector when department store Myer and Solomon Lew’s Premier Investments report their annual results later this month.