Shareholders in Retail Food Group (ASX: RFG) had lots to smile about this morning with the share price up over 10% after the Gold Coast-based food franchiser released a strong 1H FY25 result and disclosed plans for a major new growth strategy.
The country’s largest multi-brand retail food franchise manager, owning iconic brands like Gloria Jean’s, Donut King, Brumby’s Bakery posted a 20% lift in interim revenue to $69.5 million and net profit jumped 73.8% to $7.33 million.
However, the group was quick to remind the market today that performance in various chains was impacted in 1H FY25 by the cost-of-living crisis that affected shoppers' buying habits.
Overall, the group’s portfolio of 492 coffee, café and bakery stores booked a 3.5% lift in sales to $187.2 million.
No dividends were declared.
Other key numbers for today include:
Average weekly sales, up 8%.- Customer count, down 2.5%.
- 25 new outlets opened across core brands.
- Closure of 17 low-performing core brand outlets.
- Acquisition of CIBO Espresso added 22 outlets in 2H25.
- Group had cash reserves of $21.4 million.
- Net debt of $7.1 million.
Firehouse Sub rollout
However, what sparked the market’s excitement today were revelations that the group plans to introduce Australian consumers to a quick service restaurant (QSR), US-based sandwich chain, Firehouse Subs.
The small cap stock is planning to go head to head with Subway and take a major slice of the $1.7 billion food category by rolling out 165 Firehouse Subs stores across Australia over the next 10 years.
The group holds an exclusive license to expand Firehouse Subs restaurants in Australia and expects to open its first restaurant in south east Qld in 2025.
Given that there is no ‘natural hierarchy’ of competition between brands in the Australian sandwich category, the group’s CEO Matt Marshall believes there’s a great opportunity for Firehouse Subs to make its mark locally.
Marshall sees the clear lack of a clear number two in the subway market as an opportunity waiting to be seized.
Having done due diligence on the Firehouse Subs, Marshall concluded that the U.S. chain’s business operating model complements the group’s approach to site selection and pricing.
Founded in Jacksonville, Florida by two brothers in 1994, Firehouse Subs now has 1,300 stores across the U.S., and it is about to embark on the Brazilian market.
Outlook
The group is aiming to enhance its core brands through prioritising retail excellence and technology to expand them to at least 200 domestic outlets for each brand.
The group is also planning to grow its network domestically in core brands, via its new agreement to introduce U.S. brand Firehouse Subs in Australia, and internationally with Gloria Jean’s and Donut King also a key focus.
“… we are excited to announce our agreement with Restaurant Brands International (RBI) to introduce their fast-growing sandwich brand Firehouse Subs into Australia,” said Marshall.
“Firehouse Subs is a key pillar of our ambitious growth strategy and we are confident consumers will be excited by the brand’s high-quality sandwich product together with an excellent guest experience”.
Retail Food Group’s market cap is $128 million; the share price is down 35% over one year and down 19% year to date.
Based on the combined target prices of Shaw and Partners and Bell Potter, the stock is currently trading at a 95% discount to the current price of $2.06.
The stock appears to be in a long-term bearish trend confirmed by multiple indicators. Long-term, the 200-day moving average is falling and shows that demand for this stock is low.
Consensus is Strong Buy.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.