The South African owners of
troubled fashion house Country Road Group have warned Australia has been mired in a ‘retail recession’ for the last 18 months, but that its business was “absolutely fixable” despite barely being profitable and crashing sales in January.
In an update to shareholders, it was revealed that Country Road Group’s sales collapse had worsened since Christmas, down 7.8 per cent in the 26 weeks to December 29, but accelerating to a sales slump of nearly 16 per cent for the first eight weeks of 2025.
Woolworths Holdings chief executive Roy Bagattini has also conceded that the sale of up-market department store chain David Jones led to higher than expected costs now borne by its sole business in Australia, Country Road Group, with the company pushing through a company-wide restructure to slim its cost base.
Mr Bagattini, addressing analysts and investors overnight from Cape Town, revealed the restructure had touched 80 per cent of roles outside of Country Road Group’s stores and that despite Country Road Group barely profitable and facing diving sales it was “absolutely fixable”.
Country Road’s expansion into new home categories such as candles and scent was proving successful, and the repositioning of its clothing business Trenery was driving strong growth.
He also downplayed suggestions from analysts that it would sell Country Road Group, saying it had been a significant profit contributor to the company in the past and one poor year did not mean it couldn’t perform again and return to better margins.
Country Road’s flagship store is Sydney's CBD. Picture: Britta Campion
But this restructure and long-awaited revival of Country Road Group – whose brands also include Witchery, Mimco and Politix across more than 650 stores – was coming as Australia also faced a protracted ‘retail recession’.
Woolworths Holdings finance director Zaid Manjra reported that Australia has been in a “retail recession” for the last 18 months, with real GDP growth at 32 year lows and persistent inflation and high interest rates dampening consumer sentiment. His presentation explained that around 700 business in the Australian retail sector had filed for bankruptcy in 2024, up 55 per cent.
“A number of businesses including well known brands have been placed into administration or have filed for bankruptcy, of course our business to has been impacted by these market dynamics,” Mr Manjra said.
This showed up in Country Road Group’s interim results with earnings down nearly 72 per cent to $14.2m but adjusted profit before tax sinking 94 per cent to a wafer thin $2.5m.
Mr Bagattini explained that following the sale of David Jones, its Country Road Group was left with “inefficient structures and processes and significantly elevated costs”.
“This business is in the midst of a restructure, a complete overhaul in fact,” Mr Bagattini added, “to reconfigure its operating model and reset its structural economics as a stand-alone business.”
He said this restructure of Country Road Group was being accelerated and has seen four out of five roles outside its stores changed to better prepare the fashion house to perform amid tougher trading conditions and extra costs triggered by the separation from David Jones.
“This is absolutely fixable,” he told analysts as he detailed the restructure process.
“It is an unprecedented degree of change, and in fact the most change this business has experienced in its history. To give you a sense of the sheer extent of it, over 80 per cent of all roles outside of stores have been impacted in some shape or form, whether they have been streamlined and rationalised or whether they are changing scope or whether they are newly created as we invest in new capabilities.”
Country Road Group is being restructured amid a ‘retail recession’ in Australia and is carrying the extra costs of its separation from David Jones. Picture: Andrew Henshaw
Mr Bagattini said the restructure was pushed through in “record time frame” and amid a tough trading environment, which has worsened its recent financial performance.
He said Country Road Group still had good potential.
“It means we are well on track to complete Country Road Group’s restructuring before the end of the financial year, it means Country Road Group enters fiscal 2026 well set up to begin delivering to its true potential.”
This would also see Country Road Group meeting its earnings margin target of 10 per cent, but to return to its previous target of 12 per cent would require an improving Australian economy.
Country Road Group’s house of brands would work harder driving a greater clarity and distinction between each brand, with Country Road’s push into home categories working well and the reset and repositioning of Trenery was delivering growth.
When asked by analysts if Country Road Group still had a future within Woolworths Holdings, Mr Bagattini said it was not up for sale at this time.
“The question around selling an asset or selling Country Road Group in this case naturally does come when a business underperforms. It is important to remember that Country Road Group has been a significant profit contributor to our group for many years, and a bad year doesn’t detract from the long term potential we see in this business.”
Last year, Country Road Group was plunged into a workplace bullying and sexual harassment scandal that punctured staff morale and generated negative publicity for the brands. It has lost a number of senior executives, including the highly respected boss of the Country Road label, Elle Roseby, who later quit the retailer.