Specialty Fashion unfazed by Rivers loss

Specialty Fashion Group chief Gary Perlstein doesn’t regret his decision to buy Rivers, despite a $21.6m loss.

Specialty Fashion Group chief executive Gary Perlstein says he doesn’t regret his decision to buy struggling discount clothing and footwear chain Rivers despite its loss of $21.6 million last year, plunging his fashion business deeper into the red.

“No regrets at all. Not at all. We knew all the challenges when we bought it — knew all the legacy issues. It is taking us a little bit longer but it will be a very strong growth pillar for us going forward and will help us head towards $1 billion in sales and a decent margin when the business is fully turned around,” Mr Perlstein told The Australian after Specialty Fashion posted a full-year net loss of $4.46m.

The market had been looking for a loss of just over $2m. It was a turnaround from a profit of $12.475m in fiscal 2014.

The protracted and painful turnaround of Rivers will also hurt shareholders, with Specialty Fashion deciding to skip its final dividend.

But Mr Perlstein promised that Rivers, which was bought for $3.6m two years ago, would be profitable in 2017.

“We will be very satisfied with a profit in 2017 given we only paid $3.6m for it. It will show in 2017 a very favourable multiple to the purchase price and that’s what we focus on, notwithstanding it’s taken a year longer.” He said Rivers had suffered in the past from deep discounting and promotion that spoiled the brand’s premium position in the minds of shoppers. He would return it to its glory days.

“Rivers will be a retailer that will trade off its quality and comfort heritage. It was a proud and profitable brand that just lost its way.”

Specialty Fashion, whose other brands includes Katies, Millers and City Chic, said earnings before interest, tax, depreciation and amortisation was $20.3m — within company guidance — as revenue rose 15.54 per cent to $791.5m.

Mr Perlstein said he was pleased with the strong performance from Millers, Crossroads, Katies, Autograph and City Chic, with the company’s same-store sales growth — excluding Rivers — up 5.3 per cent — the third year in a row of comparable sales growth above 5 per cent.

Mr Perlstein said Specialty Fashion had focused on pulling back promotions and discounts across its retail fashion chains, investing more in quality and value.

“That’s the key going forward: not competing on price.’’

Mr Perlstein said during the year the retailer invested heavily in its omni-channel and online capabilities, with its 1000-plus stores now having a “click and collect” service for shoppers.

Shares in Specialty Fashion ended 2.5c lower at 55c.