Specialty Fashion says a Qatari takeover of the Millers and Rivers owner is unlikely to go ahead and has warned weak consumer spending will continue to hurt sales.
The group, which also owns the City Chic, Crossroads, Autograph and Katies retail chains, has fallen deeper into the red with a $8.4 million loss for 2016/17.
This was nearly four times the prior year's $2.2 million loss, largely due to $7.4 million in one-off costs related to the closure of six standalone City Chic stores in the US in favour of concession stores inside department stores.
Shares in Specialty Fashion plunged more than 20 per cent to 36 cents at 1500 AEST.
Specialty Fashion had been in talks with investment company Al Alfia - which is controlled by the Qatari royal family - following an indicative $135 million bid but chief executive Gary Perlstein said there had been no "active discussions" since February.
The takeover was thrown into doubt after the death of the sole shareholder's father, former Qatari ruler Sheikh Khalifa bin Hamad al-Thani, in October.
Mr Perlstein said the group will now push ahead with growing its earnings, which it did during the year to June 30 with a 6.6 per cent lift in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $26.7 million.
"We were not as aggressive with discounting as the rest of the market," he said.
"We met the market's promotional and discount activity with more tailored promotional offers that didn't eat too much into our gross margin and focused on improving the product."
As a result, the group did sacrifice sales growth, particularly in apparel brands that target older women, with sales declines at Millers, Crossroads, Autograph and Katies offsetting solid sales growth from Rivers and plus size women's brand City Chic.
Total revenue dropped 2.1 per cent to $808.9 million with comparable sales down two per cent compared to a year ago.
However, Rivers returned to profit for the first time since Specialty acquired the clothing and shoe chain in 2013.
Mr Perlstein said the group has managed to shift public perception around Rivers over the past five years from being cheap to being good value for quality and comfort.
He said the group faces ongoing weak consumer spending due to soft wages growth and heavy discounting from rivals.
"The way we can improve top line growth is by transitioning more of our sales online because we are getting good growth rates online across all our brands," he said.
Online sales were up 15 per cent to $83.7 million and accounted for just over 10 per cent of the group's total revenue.
The group has 1,043 physical stores across Australia, New Zealand, the United States and South Africa.
SPECIALTY FASHION'S LOSS DEEPENS:
* Net loss $8.39m v $2.19m
* Revenue down 2.1pct to $808.9m
* No dividend for third straight year
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