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Gold Coast-based franchise group Retail Food Group (ASX: RFG) has lowered its earnings guidance for the full year after challenging retail trading conditions drove network sales lower in the second half.
RFG is targeting full-year underlying EBITDA of between $20 million to $21 million, down from a previous range of $20-$24 million,
The Gloria Jean's and Donut King parent says recent interest rate increases, rising inflationary pressures and historically low consumer confidence have combined to squeeze spending across its franchise network in the first 20 weeks of the second half of FY26.
Core brand network sales fell 4.8 per cent over the period versus the prior comparable period, while core brand same store sales declined 0.8 per cent - a marked deterioration from the 0.2 per cent same-store sales growth recorded in the first half.
The weakness aligns with broader consumer sentiment data, with Westpac's Consumer Sentiment Index reading just 83 in May after touching an extreme low of 80.1 in April, and a Reserve Bank rate hike in May adding further pressure.
“Trading conditions remain difficult for our franchise partners, and we have responded by focusing our marketing activity on simple, value-led campaigns designed to reconnect with core customers, drive transaction growth, and stabilise customer count performance," says RFG executive chairman Peter George.
"Our use of more scalable and efficient campaigns, focused on core product ranges and frequency-driving occasions, is a key element of our ongoing transformation agenda, which is ultimately focused on supporting our franchise partners as they navigate these challenging trading conditions”.
RFG says its cost rationalisation program is running ahead of schedule, with expected FY26 savings of $2.3 million to $2.5 million, up from $1.2 million to $1.8 million previously, while FY27 savings remain steady at $5 million to $7 million as the group works to right-size its cost base against softer revenues.
“We remain focused on the execution of our transformation program and delivering enhanced solutions for our franchise partners to unlock growth and drive profitability," says George.
"RFG will enter FY27 with a more efficient cost base, a refreshed approach to driving network performance, and an enhanced alignment across marketing and operational functions.
"We therefore consider the 2H26 will represent an earnings inflection point and that the many positive initiatives implemented or in development will contribute to a stronger FY27.”
On the growth front, the company says its first Firehouse Subs restaurant remains on track to open this month at Westfield Mount Gravatt in Brisbane.
Firehouse Subs is a US-founded franchise brand specialising in premium hot subs, and the Australian rollout represents a key pillar of RFG's portfolio diversification strategy.
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