Margins at Country Road Group are facing further pressures according to a recently released trading update by its parent company Woolworths Holdings Limited (South Africa).
In the statement, WHL reported that costs are still under control across the group - which also includes the company’s South African department store chain Woolworths - but added that the impact of a weaker top-line environment is resulting in continued negative operational leverage in its apparel businesses.
“In Australia, the Country Road Group is being further impacted by inflated import costs due to a weaker AU$, coupled with higher fixed costs.
Country Road Group holds five fashion labels, including Politix, Witchery, Mimco, Trenery and Country Road.
At the time of releasing its interim results, WHL’s outlook for the second half of the 2024 financial year was expected to remain challenging, considering the continued pressure on consumer disposable income from high interest rates and living costs.
“Management had also advised that the Group was well-positioned to benefit from any cyclical consumer recovery,” the company noted. “Trading conditions in the second half to-date have, however, proven tougher than expected for our apparel businesses, with further deterioration in footfall and discretionary spend in both geographies.”
The latest statement by WHL comes as Country Road Group navigates sexual harassment and workplace bullying allegations, with its parent company launching an internal investigation.
The alleged improper behaviour includes “sexually laced comments”, unwanted kisses and touches and workplace bullying, with many staff reportedly angry at the initial response by its parent company, including failure to offer adequate support.
WHL’s latest statement also issued guidance on its earnings which is expected to be impacted by the disposal of its David Jones operations. The group had sold off the department store chain in 2023 to Anchorage Capital Partners.
“Accordingly, the group's results to be reported for the 53 weeks ending 30 June 2024 are not directly comparable to that of the 52 weeks ended 25 June 2023,” the group reported.
WHL reported that its overall earnings per share (EPS), headline EPS and adjusted diluted EPS for this 53-week period are expected to be more than 20 per cent lower than the reported EPS, HEPS and adHEPS for the prior year, “in part as a result of the inclusion of the David Jones business, as well as the profit on disposal, in the Group's 2023 results.”
The group's results for the year are expected to be released on or about September 4, 2024.