Country Road Group will restructure its operations in the face of poor sales and profits

LISTEN | The boss of the scandal-plagued Country Road Group has conceded the fashion house has suffered its worst financial performance and needs to restructure and slash costs.

The boss of scandal-ridden Country Road Group has conceded the fashion house has suffered its worst financial performance in its history and demands a total relook at its structure, new leadership teams and cutting costs – which will likely lead to job losses.

Country Road Group will restructure its sourcing and supply chain, while also looking for better pricing deals with suppliers at a time when sales are diving and the retailer needs to cut its cost of goods sold.

There will also be investment in its sales push into South Africa, where Country Road Group presently only has around 11 per cent of total group sales, but there is belief that can grow much higher.

In an address to Country Road Group staff at its Melbourne headquarters on Wednesday morning, which started with a ‘acknowledgment of country’ speech, chief executive Raju Vuppalapati said recent staff surveys were “confronting” and has seen a sharp fall in staff morale with employees telling the company it wasn’t “the best version of ourselves”.

Employees were told they needed to embrace a “mindset shift” as the company went through its restructure.

Mr Vuppalapati said Country Road Group, whose brands include Country Road, Trenery, Mimco, Witchery and Politix, had seen its sales and profits dive in 2024 which he called a “perfect storm” of economic challenges, but he also acknowledged the internal workplace issues had played a part.

“The surveys said we are not the best version of ourselves,” Mr Vuppalapati said in his opening remarks to staff and relayed to The Australian. “The emerging themes were trust, we need to rebuild trust, we need leaders to be visible. Some responses have been confronting,” he said.

In the wake of the scandal, Country Road Group has set up a “respect at work” working group.

“We need to change our operating model, an end to end relook on structure, how we work together … and ensure all brands grow.”

Mr Vuppalapati said this was a “unique opportunity” but that “difficult choices needed to be made” to ensure all its brands can grow.

Country Road will overhaul its operations amid profit hit and low staff morale. Picture: Gaye Gerard/NCA NewsWire

Mr Vuppalapati said Witchery was under pressure and had lost the magic that made it successful 10 years ago, and Mimco needed to return to its tradition of being a more stylistic business that drove fashion forward.

On Wednesday, Mr Vuppalapati and the management team presenting on stage did not provide details of the expected job losses, but company insiders told The Australian that redundancies would be significant with the new leadership structure for Country Road Group to be unveiled by October 16 and the new staff teams by mid-November.

It is believed that in November the job losses will begin as the new team structures lead to redundancies.

In June, The Australian revealed that Country Road Group was engulfed in a sexual harassment and workplace scandal. It saw two highly placed executives suddenly depart and the global boss Roy Bagattini flying to Australia to address staff to announce an external investigation into the handling of complaints at the retailer’s Melbourne headquarters.

One of those executives was Rachid Maliki, who was brought in from outback outfitter RM Williams as Country Road Group’s chief supply chain officer. Following allegations of sexual harassment and bullying, it is believed that Mr Maliki was given two weeks leave as an investigation was mounted. He later exited the business suddenly on February 19 after only 19 months in the role. There were also allegations of workplace bullying against a second RM Williams executive brought into Country Road Group, Mehmed Mustafic, around his alleged treatment of some staff members.

These allegations did not include sexual harassment or sexually inappropriate conduct. Mr Mustafic exited the business on March 21 after serving for only 10 months in the role as general manager of sourcing and product development.

Mr Mustafic and Mr Maliki both worked as executives at RM Williams. Both were brought across to Country Road Group by CEO Mr Vuppalapati, the former boss of RM Williams, who joined Country Road as its boss in mid 2021.

There have been no official findings against Mr Maliki or Mr Mustafic.

The fallout from the workplace bullying and sexual harassment scandal saw staff morale sink and the departure of other staff, including the boss of the Country Road label, the highly respected fashion executive Elle Roseby. Ms Roseby, who was greatly supported by Country Road Group staff and seen as a strong bulwark against the improper workplace behaviour, was later hired by home furnishings retailer Adairs to be its new CEO.

The Country Road Group scandal also saw the company’s flagship Country Road store in Toorak, Melbourne, vandalised with posters and a protest organised by a union held outside the store.

Country Road Group CEO Raju Vuppalapati addressed staff about its restructure.

Flanked by other senior management on stage, Mr Vuppalapati made his pitch to staff for the restructure and relook at how Country Road Group operates – which will involve some job losses – in the face of the workplace bullying and sexual harassment scandal that engulfed the retailer earlier this year. There was also a commitment to improving workplace conditions after a slide in employee engagement.

Mr Vuppalapati in his opening statement to Country Road Group staff said this was a critical time for the company and that although the retailer was profitable in 2024 it was the “worst financial performance for the company”. Country Road Group recently reported a 66 per cent slump in adjusted operating profit of $51.3m for the 53 weeks to June 30, as sales fell by 13 per cent.

Sales had continued to plummet for the start of 2025 with the retailer’s owner, South Africa’s Woolworths Holdings, recognising it needed a restructure and cost-cutting measures to arrest its financial demise.

“This is not who we are and not our potential … and clearly 2024 has told us it is time to reset our operating model. This is not just about cost, this is about looking at how we operate to bring financial discipline to invest,” he told staff at the meeting.

Country Road’s Chapel street store was hit with protest posters over the head office sex abuse scandals of women. Picture: David Caird

In his opening remarks to staff, Mr Vuppalapati said this was a critical time for the company. “Not just a question of the operating model, but an end to end relook,” he said.

Mr Vuppalapati said most retailers would love to own the company’s five iconic brands and that “everyone wants to copy us”.

He conceded that its Witchery brand was “under pressure for a long time now” and that there was a desire to “recreate the magic” of what the brand was 10 years ago. Mimco needed to get back to the days when it was a “stylistic business” that drove fashion.

Other managers told staff that the restructure needed a “mindset shift” and a change in the way the company works, and that the company shouldn’t hesitate what it does for “fear of failure”.

A spokeswoman for Country Road Group told The Australian: “Country Road Group is embarking on a strategic business transformation plan to position itself for growth. We are changing our operating model to leverage our scale, capabilities and culture as a House of Brands. This will enable us to be passionately focused on delivering the best product and experiences for our customers.”