Country Road Group sales plummet amid workplace scandal

Country Road Group sales have plummeted 13 per cent amid a sexual harassment and bullying scandal that has seen executives leave the business and its workplace culture shredded.

Country Road Group sales have plummeted amid worsening trading conditions and a workplace scandal. Picture: Lachie Millard

Country Road Group, the fashion retailer gripped by a sexual harassment and bullying scandal, has suffered a 13 per cent dive in its full-year same store sales, with the company dragged down by some of the worst trading conditions for discretionary retailers in years.

The South African owners of the Australian fashion house, Woolworths Holdings, have also revealed that trading worsened in the second half as costs blew out due to a weaker Australian dollar, with the company also booking a goodwill impairment against menswear fashion chain Politix.

The dour trading update issued to the Johannesburg stock exchange on Wednesday comes as Country Road Group – which owns labels Country Road, Mimco, Trenery, Witchery and Politix – was embroiled in a workplace scandal in May involving former executives, with the company also launching an externally led investigation into the handling of the matters.

Since the sexual harassment and bullying scandal was made public, two senior male executives have departed Country Road Group, while the highly respected boss of the Country Road label, Elle Roseby, has quit the retailer. There were no allegations made against Ms Roseby and she is believed to have decided to leave in the wake of the culture issues at the fashion group.

Now just as Country Road Group is searching for new executives and trying to repair its shattered reputation and corporate culture, it is facing a significant slowdown in sales alongside rising costs. It also comes as Country Road Group staff prepare for a restructure that will likely see job losses.

According to the trading update issued by Woolworths Holdings, Country Road Group sales declined by 6.8 per cent for the 53 weeks to June 30 and by 8 per cent on a comparable 52-week period and 13.1 per cent in comparable stores.

Trading in the second half was particularly volatile as sales declined by 11.3 per cent. This was against the previous year in which sales grew by 12 per cent following the strong post-Covid pent up demand in the first half.

Country Road Group sales declined by 6.8 per cent for the 53 weeks to June 30 and by 8 per cent on a comparable 52-week period and 13.1 per cent in comparable stores.

“Retail trading conditions in Australia and New Zealand deteriorated further in the second half, with consumer sentiment at near-record lows and the prolonged cost of living crisis continuing to impact both footfall and discretionary spend,” Woolworths Holdings said in its trading update.

Notwithstanding the challenging macro-economic backdrop, the Country Road brand delivered positive growth for the period, it said.

Costs continued to be a problem for the Australian fashion house, however.

“Whilst the group has maintained its stringent focus on preserving gross profit margin and containing costs, we equally continue to invest behind our key strategic initiatives. This, coupled with the impact of a weaker trading environment, has resulted in negative operational leverage in both apparel businesses.

“This was particularly prevalent in Country Road Group which was further impacted by inflated import costs due to a weaker Australian dollar, and the business’s inherently higher fixed cost base.”

This includes a goodwill impairment booked against Politix, the menswear brand it bought in 2016.

“Furthermore, the reassessment of the carrying value of the Politix business in Country Road Group, has resulted in a non-cash impairment of goodwill which impacts the earnings per share for continuing operations and the total group.”