Retail Food Group shares continue to plummet

Donut-King-OutletShares in Retail Food Group have continued to plummet for a second day after a damaging profit warning from the embattled owner of the Gloria Jean’s, Michel’s Patisserie and Donut King brands.

RFG shares fell 17.9 per cent to $1.625 on Wednesday – their lowest value since July 2009, compounding a 25 per cent slump suffered on Tuesday when the company warned its first-half profit is expected to decline by more than a third.

The franchise chain owner’s shares have now fallen 63 per cent since December 11, after Fairfax Media first published stories from an investigation into allegations of high fees and financial stress suffered by franchisees.

The Fairfax reports have also claimed that significant proportions of Gloria Jean’s and Pizza Capers franchises are up for sale.

On Thursday morning, shares recovered and bounced up over 20 per cent to $1.96.

The plummeting stock prices has wiped $507 million from RFG’s market value in just eight trading days.

RFG did not respond to requests for comment from AAP on Wednesday, however the company has previously denied all allegations in the reports and has blamed a tough retail environment as having a negative impact on its franchisees’ sales.

The company said on Tuesday that its Crust Pizza and Donut King brands have continued to perform in line with forecasts but Michel’s Patisserie, Brumby’s and Gloria Jean’s are trading below expectations.

It said domestic franchise revenue is now expected to be lower than previously anticipated, and it will book one-off costs of $7 million, including expenses linked to a business-wide review, in its accounts for the six months to December.

As a result, the group’s now expects a net profit of around $22 million for the half year, down 34 per cent on $33.5 million in the same period a year ago.

Meanwhile a law firm involved in a class action against Volkswagon has turned its attention to Donut King and Gloria Jean’s owner the Retail Food Group.

Bannister Law says it is investigating a potential class action against RFG, and whether the company had reasonable grounds to issue forecasts between August 29 and December 7 of underlying annual profit growth, and whether it should have corrected its guidance earlier than December 19.

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