Country Road's profit downgrade

27 July 2010

Country Road has attributed an anticipated profit drop of between15 and 20 per cent for the year to June 30, to widespread price slashing throughout the fashion industry.

The retailer's recent trading update, released 20 July, reported sales for the year to June 30 up 8.5 per cent but like-for-like sales up only 1.5 per cent. For the 2008-09 financial year, it posted total sales up 18.4 per cent to $343.1 million and net profit up 60.4 per cent to $15.6 million.

Retail sales were up 13.2 per cent inclusive of new brand Trenery, and comparable Country Road like-for-like sales up 0.8 per cent.

Discounting in a highly competitive market and the start-up costs of its Trenery label meant earnings were likely to be below those of last year, the company said.

Country Road's new CEO John Cheston, who took up his position on 1 July, said:

"During the year, Australia passed the anniversary of the 2008/9 government stimulus payments and faced six interest rate increases. This impacted consumer spending and created a highly competitive retail market in the country."

Cheston added that despite a "challenging" immediate economic outlook, Country Road remained optimistic for the year ahead.

"The last year has been challenging for our business however we will continue to focus on our store rollout strategy for our two brands, while continuing to review and implement cost saving initiatives."

Country Road's downgrade sets a gloomy tone for the reporting season, with many retailers citing heavy discounting as the cause of shrinking margins and profitability.

The company's full results will be announced in August.

 

 

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