Retail Food Group tips record profit and launches Chinese expansion

Retail Food Group, which owns the Donut King, Michel’s Patisserie, Brumby’s Bakeries and bb’s cafe franchise systems, has told the Australian Stock Exchange that it expects profit for 2007-08 to more than double, from $7.52 million to between $16.3 millio

Finally, a ray of hope in the retail downturn gloom.

Retail Food Group, which owns the Donut King, Michel’s Patisserie, Brumby’s Bakeries and bb’s cafe franchise systems, has told the Australian Stock Exchange that it expects profit for 2007-08 to more than double, from $7.52 million to between $16.3 million and $16.8 million.

RFG chief executive Tony Alford says the acquisitions of Brumby’s and Michel’s is the biggest reason for the jump in profit, but also says average weekly sales have grown strongly across the company’s four franchise systems.

“Whereas retailing is either a beneficiary or casualty of changes in general economic conditions, RFG’s franchise systems… historically have been largely insulated from, and resilient to, the at-times violent movement in retail spending,” Alford said in a statement.

Retail Food Group shares climbed 6.7% this morning in reaction to the news and are trading around $1.44.

The good news for RFG comes just a day after the company announced it had signed a deal to take its Donut King brand to China by signing a licensing agreement with Shanghai-based Mak Brands Limited. RFG expects the 20-year licence will a deliver significant royalties on top of the initial sign-up fee.

The agreement calls for the establishment of a minimum of 20 outlets within five years and eight new stores each year after that.

Alford says Donut King’s product range in China will be different from Australia, where customers favour sweet, heavily-iced donuts.

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