Retail Food Group may close 456 stores: UBS

Retail Food Group may close 456 stores: UBS
Retail Food Group may close 456 stores: UBS

The ailing food franchisor Retail Food Group may close more than 400 stores over the next three years, according to a report by UBS.

The investment bank slashed its earnings forecasts for Retail Food Group after factoring in shrinking sales from store closures.

UBS analyst Jordan Rogers believes RFG may need to close as many as 456 stores in Australia between 2018 and 2020, mainly in its bakery division, which includes Donut King, Michel's Patisseries and Brumby's Bakery, and its quick service restaurants divisions, which owns the Crust and Pizza Capers brands. 

This doesn't include about 200 outlets forecast to close in 2018, the Australian Financial Review article noted.

Store closures in Australia would be partially offset by about 145 new stores and outlets overseas, taking total stores to 1984 by 2020. However, RFG is unlikely to reach its long term target for 3500 stores.

RFG shares have fallen 44 per cent since Friday, when the franchise systems business announced plans to close between 160 and 200 outlets over the next 15 months.

UBS believes more closures will be necessary before RFG reaches a sustainable base.

​"We expect the closures to accelerate and go beyond those initially identified by RFG given the deterioration in underlying performance and pressure with the Michel's structure, in particular,"  Mr Rogers said.

"A successful repositioning of Michel's and deceleration of closures would be the most likely potential change to our view, but it is difficult to have confidence in this scenario after network sales fell 22 per cent in (the December-half)," he said,

"We now forecast about 460 net outlet closures over the next 2.5 years (36 per cent closure of current domestic portfolio partially offset by about 100 net openings in the international division) and have lowered margins in each division to account for an expected change in the value split between RFG and franchisees."

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Retail Property Ubs

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