Country Road Group has released its annual results and warned of a 66% drop in profit to $51.3 million.
👉 Background: Country Road Group is the fashion retailer that owns Country Road, Mimco Witchery, Trenery, and Politix. The group is owned by the South African company, Woolworths Holdings (not Woolies Australia). And yes, it's the same Woolworths Holdings that also used to own David Jones.
👉 What happened: Now, Country Road Group has released its annual results and warned of a 66% drop in profit to $51.3 million.
👉 What else: While some believe this is a result of a major workplace behaviour scandal, Country Road reckons that a big part of its weak earnings was driven by its owner's decision to sell off David Jones. Country Road Group thinks it has lost out on a number of shared services with David Jones and as a result, they've lost economies of scale too.
💡Economies of scale happen when a company is able to spread its costs across more products or services. It’s kind of like buying in bulk - you end up paying less per unit.
💡When Woolworths Holdings owned both Country Road, and David Jones, they were able to share certain costs, and infrastructure which reduced overall operating costs for both.
💡But, since David Jones was sold, Country Road Group has been left to bear those production costs on its own, bringing their profit margin from last year's 12.4% to just 4.6% this year.
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