Best & Less follows on the heels of ASX-listed retailers sounding the alarm including Baby Bunting, Adairs, Universal Store, Super Retail Group (which owns Rebel Sport and BCF), Donut King operator Retail Food Group, and Domino’s Pizza, all of which have issued downbeat trading updates since the start of May.
Mr Blundy and his long-time business partner Ray Itaoui lobbed a zero premium, off-market takeover offer for Best & Less in May. Mr Itaoui joined as executive chairman on June 5, taking on the responsibilities of CEO for an interim period.
The Iconic’s former CEO, Erica Berchtold, will head up Best & Less after leading Australia’s largest online-only fashion and lifestyle retailer since 2019.
Mr Itaoui has positioned the chain for more challenging trading conditions, with discounts to clear winter stock and inventory culls. Any cost initiatives and the benefits of lower product and shipping costs will not come through until the first half of next fiscal year.
Best & Less now expects to deliver second-half revenue of between $310 million and $315 million, and pro forma net profit after tax of between $3.6 million and $4.2 million. That excludes a potential after-tax impairment charge, and is significantly weaker than expectations of between $10 million and $12 million.
The Australian Financial Review’s Street Talk column revealed in May that Mr Blundy and Mr Itaoui made a $1.89-per-share cash offer for the chain.
Deloitte estimates the value of Best & Less shares is between $2.03 and $2.43, but recognises the two retail veterans would likely end up controlling the company with private equity group Allegro already signalling it is selling out.
As at June 19, the bidders had approximately 66.46 per cent of Best & Less.
This month, the Fair Work Commission decided to increase the pay of 2.4 million people on awards by 5.75 per cent presenting a challenge to profits. At the time, broker UBS concluded that Premier Investments, footwear and clothing retailer Accent Group, Universal, jewellery chain Lovisa, Harvey Norman, Super Retail and JB Hi-Fi would be among the hardest hit.