Taste Holdings’ first-half loss almost doubles as jewellery division swings into the red
Sales growth of 6% from Taste Holdings’ fast food outlets failed to offset a 15% drop in sales from its jewellery stores, dragging the group’s interim revenue down 9% to R483m.
Taste said in its results for the six months to end-August, released on Thursday morning, that after “inter-segment eliminations” were accounted for, its food division’s revenue declined by 1%.
“Any operational gains made during the six months have been overshadowed by the brutal and sustained decline in consumer spending across almost all categories that the group trades in,” CEO Carlo Gonzaga said in the results statement.
Before inter-segment eliminations, food revenue grew 6% to R282m while jewellery sales fell 15% to R253m.
The jewellery division swung from a pretax profit of R14m in the matching period to a loss of R9m. The food division’s loss widened to R71m from R64m.
The group’s overall aftertax loss nearly doubled to R66m from R34m.
“We expected sales in the luxury goods division to decline. Luxury goods are cyclical and follow consumer sentiment, the exchange rate and disposable income trends reasonably predictably,” Gonzaga said.
“What we did not expect was the extent nor the speed of the decline in the first quarter of the current period.”
Taste recently abandoned plans to sell its jewellery division, whose brands include NWJ, Arthur Kaplan and World’s Finest Watches.
“Having initiated a sale process, it was soon evident that the timing of concluding a sale was not ideal. The group has therefore stopped the sale process and is focusing its attention, across both divisions, on the operational and tactical responses this environment necessitates,” Gonzaga said.
The group reduced the number of jewellery stores over the year from 83 to 79 by end-August.
Taste grew the number of corporate-owned stores to six Starbucks and 63 Domino’s, giving a total of 69 — more than double the prior year’s 34.
“Although not immune from the cycle, Domino’s and Starbucks performed acceptably during the period, with Dominos posting a 1% increase in same-store sales.”
What Gonzaga called “brands trading in the lower income consumer segment” — Zebro’s Chicken, The Fish & Chip Co and Maxi’s — bore the brunt of the sales decline.
“Our efforts to improve the value proposition, combined with increased marketing spending, have been met with limited success and certainly have not been enough to counter the current sales cycle,” Gonzaga said.
Taste Holdings shares were trading down 4.3% at 89c in early on the JSE on Thursday.