Retail Food Group Flags Tough Half, Pins Hopes on FY26

Retail Food Group Limited ((AU:RFG)) has held its Q2 earnings call. Read on for the main highlights of the call.

Retail Food Group’s latest earnings call painted a difficult but not hopeless picture for investors. Management acknowledged a sharp fall in first-half profitability and weaker cash generation, yet stressed that core brands are holding up, cost cuts are gaining traction, and refinancing has bought time for a planned operational turnaround to show through.

Core Brands Show Resilience Amid Network Shrinkage

Core brands posted network sales growth of 0.8% and same-store gains of 0.2%, with average weekly sales up 0.9%. This signals that remaining stores are trading better even as outlet numbers fall, suggesting quality over quantity is slowly improving brand health.

Beefy’s Delivers Strong Growth but Mixed Store Ramp-up

Beefy’s Pies was a standout, delivering 19% network sales growth and 4.6% same-store sales growth, with average weekly sales of $28,000. However, seven newer stores averaged just $15,000 a week, about 70% of the non-highway average, highlighting execution risk as the concept expands.

Gloria Jean’s Glorange Refresh Drives Double-Digit Uplifts

Refurbished Gloria Jean’s “Glorange” outlets delivered powerful sales uplifts, with Goulburn up 31% and Robina up 25%. A new store in Shepparton is trading 24% above the network average, and five further refreshes are planned in the second half to extend the format’s early success.

Product Innovation Powers Donut King and Crust

New product initiatives are paying off at Donut King and Crust, supporting top-line momentum in a tough consumer environment. Donut King’s premium Christmas range lifted campaign performance by 15%, while Crust’s five summer flavours generated more than $1 million in extra sales after prior wins from meat deluxe launches.

Refinancing Secures Funding and Buys Time

Post-period, RFG completed a refinancing via a new $41.2 million facility maturing in August 2027, with an extra $7.5 million available. This provides short-term funding certainty and supports strategic priorities, though management expects the facility to be fully drawn by the end of FY26.

Transformation and Cost-Out Program Gathers Pace

The transformation program, focused on cost rationalisation and operational improvements, has already delivered a current-year savings run rate of $1.2–$1.8 million. RFG is targeting annualised savings of roughly $5.7–$7.0 million by FY27, positioning cost discipline as a key lever for margin repair.

Company Store Reset Targets Better Cash Flow

RFG’s push to transition or exit underperforming company stores is well progressed, with 70% of the 50 targeted outlets agreed or completed. These stores produced a post-AASB16 loss of $1.2 million and $2.1 million of cash outflows in H1, costs that should ease as exits are finalised.

International and Supply Chain Platform Strengthened

The new Turkiye supply hub is now operational, expected to lift service levels, purchasing compliance and freight flexibility across the region. International outlet numbers remain stable at 528, and management continues to flag meaningful upside for international EBITDA contributions over the longer term.

Firehouse Subs Expansion on Schedule

RFG reported solid progress on the Firehouse Subs rollout, with work advancing on suppliers, store design and marketing. The first Australian restaurant is targeted for Q4 FY26 under a 20-year development agreement, with about half of the initial three-year target of 15 company stores expected by the end of FY27.

Sharp Decline in EBITDA and Profitability Weighs on H1

Despite operational pockets of strength, H1 financials deteriorated sharply, with underlying EBITDA down 43% to $9.2 million. Statutory NPAT fell to $2.0 million from $7.3 million, hit by weaker margins, one-off comparatives and lower benefits from lease-related adjustments.

Revenue and Cash Flow Under Pressure

Underlying revenue slipped 1%, with domestic network sales at $254.6 million, also down 1% on the prior period. Operating cash flow worsened by $9.9 million year-on-year, reflecting softer trading and cash outflows linked to company store transitions, which reached $2.1 million in the half.

Coffee Margin Compression Hits CCB Division

Rising green coffee bean costs squeezed group margins as RFG opted to absorb price pressures to support franchisees. This fed into a weak performance in the coffee-centric CCB division, where network sales fell 2.4%, same-store sales dipped 0.4%, and segment EBITDA plunged 47% to $7.5 million.

Network Contraction and Early 2026 Softness

Domestic outlets fell to 693, down 29 since June, as low-performing and non-core sites were exited, a move that lifts average quality but reduces scale and revenue. Early trading in calendar 2026 has been soft, with core brand network sales down 5.5% and same-store sales down 0.2% over the first eight weeks.

Liquidity Tight but Manageable Near Term

RFG ended H1 with $16.7 million in cash, although $11.3 million is restricted for marketing funds, guarantees and other commitments. With $32.5 million of borrowings drawn and the new facility expected to be fully utilised by FY26, the group remains focused on managing liquidity and upcoming refinancing risks.

Guidance: H2 Turnaround Needed to Hit FY26 Targets

Management reaffirmed FY26 underlying EBITDA guidance of $20–24 million, implying a material step-up from the $9.2 million delivered in H1. The planned wholesale coffee price increase, further cost-out benefits, margin improvement and completion of company store transitions are all expected to underpin a second-half recovery in earnings and cash flow.

RFG’s earnings call underscored a business in transition, balancing weak near-term numbers with credible self-help levers and selective growth bets. Investors will now look for proof that cost savings, price resets and portfolio clean-up can reverse margin erosion and turn modest brand-level momentum into a durable earnings rebound by FY26.