Fashion retailer Rivers has suffered an estimated $11 million loss in just six months, delivering a blow to the earnings of its new owner.
Specialty Fashion Group, which also owns the Katies and Millers chains, has flagged a 32 per cent slide in half year earnings due to the poor performance of Rivers.
The company expects to have achieved earnings of between $21 million and $23 million in the six months to December 31, down from $31.2 million last year.
It admits the turnaround plan for Rivers, which it bought for just $3.9 million in late 2013 in a deal hailed by many as a bargain, was taking longer than expected.
OptionsXpress market analyst Ben Le Brun said it appeared the company was looking to improve Rivers' offering by getting rid of old stock.
"It looks like they are doing what needs to be done in terms of moving the stock on and heavily discounting rivers to reinvigorate the brand," he said.
The profit warning comes a day after luxury goods retailer Oroton warned its half year underlying earnings will slide by up to $3.5 million, due partly to costs from its new joint venture with US clothing label Brooks Brothers and franchise agreement with Gap.
Despite Specialty Fashion's earnings warning, chief executive Gary Perlstein remains upbeat about Rivers' long term prospects.
"We remain confident that Rivers will make a meaningful contribution to the company's profitability in future years, alongside our other brands," he said.
The problems with Rivers offset an otherwise strong performance from Specialty Fashion's other businesses, which recorded comparable sales growth of 5.7 per cent during the half.
Total sales, including Rivers, jumped 27.4 per cent to $413 million during the half.
Specialty Fashion shares were 1.5 cents higher at 72.5 cents at 1415 AEDT.
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