Retail group Specialty Fashion suffered a 64 per cent half year profit slide as its recently acquired Rivers stores bled from discounting.
The company, which also owns Katies and Millers, bought the three-decade-old, family-owned Rivers chain for a bargain $5 million in late 2013 with the aim of expanding the number of stores.
But in the six months to December 31 last year, Rivers made a loss of $11.2 million.
Specialty chief executive Gary Perlstein said that occurred as old stock was sold at the clothing and footwear brand.
“It was through having to clear all that old product at very low prices, that’s where the loss came,” he told AAP.
“We also cleared those products in half the time planned.
“So we actually impacted the result more negatively than what was anticipated.”
Mr Perlstein said Specialty remained committed to expanding the number of Rivers’ Australian stores from 160 to 220, and expected Rivers to be a drag on Specialty’s margins for the next 12 to 18 months.
“When you pay such a low price, there’s a lot of work to do and it will still stack up to be a very good acquisition from a financial and numeric point of view,” he said.
Specialty Fashion made a half year net profit of $5.86 million, down 64 per cent from $16.23 million a year earlier as Rivers incurred a loss.
The value-focused clothing seller will not pay an interim dividend to shareholders.
Mr Perlstein said this was so funds could be spent refurbishing Millers and Rivers stores.
“Both those businesses we’ve decided to do an aggressive refurbishment program and we want every dollar available for that,” he said.
Specialty shares closed three cents lower, down 4.3 per cent, at 67 cents.
SPECIALITY’S RIVER OF PROFIT SLOWS
* Net profit of $5.9m, down 64pct from $16.2m
* Revenue of $413m, up 27pct from $324.3m
* No interim dividend, down from two cents per share