RFG withdraws earnings guidance due to COVID-19

DONUT King owner Retail Food Group will pause non-essential capital spending, freeze recruitment and slash director fees by 20 per cent as it deals with the fallout from the COVID-19 crisis.

Internationally the impact has been more severe with 200 outlets “temporarily closed”.

The company in an announcement to the ASX yesterday said it was withdrawing its FY20 underlying pre-tax earnings guidance of between $42 million and $46 million.

It said it has been closely monitoring the COVID-19 situation, including the new restrictions on social gatherings, which restrict cafes and restaurants to takeaway only.

RFG said this will impact its coffee and donut franchises, which include Gloria Jeans.

“A reduced customer count among RFG’s domestic franchise network, as a consequence of the increasingly onerous restrictions made in a series of announcements by the government since last week, is anticipated by the Company (and supported by recent trading data referable to that period),” the statement reads.

“The trend will likely be more pronounced, in the Company’s view, among outlets operating within shopping centres.

“Given these matters, together with the significant uncertainty that exists in relation to the duration and impact of the COVID-19 pandemic, the Company no longer considers it appropriate to maintain its existing FY20 guidance, which is now withdrawn.”

Executive chairman Peter George said there has only been a “handful” of domestic closures.

However, the impact overseas has been more severe with 200 stores closing “temporarily”, including 29 in the US.

Mr George said the company is doing everything it can to support its franchises, including “vigorous representation of their interests to landlords”, and supply chain management.

He said the company anticipates it will need to provide additional financial support to franchises as the situation changes.

Shares closed down 8.5 per cent at 3.2¢.