Speciality Fashion Group reveals profit slump, wants to bring Victoria’s Secret to Australia

Savage discounting and rising cotton prices have slammed women’s fashion operator Speciality Fashion Group, sending first half profits down 37% to $16.8 million.

But there is some bright news on the horizon for the company, which is seen as a bellwether for the retail sector. Chief executive Gary Perlstein says the company is in talks to bring iconic lingerie brand Victoria’s Secret to Australian stores for the first time.

Specialty Fashion, which owns chains including Millers, Katie’s and City Chic, says it experienced sharp increases in rents and labour costs as it expanded during the six months to December 31 but the fragile consumer environment meant it could not lift sales to offset costs rises and revenue fell 1.6% during the period to $312 million.

While the stronger Australian dollar gave the company more clout in terms of buying raw materials, Perlstein says rising raw materials prices and wages in Chinese manufacturing centres would create a “new headwind” for retailers.

Passing on those costs in an environment where consumers are still actively hunting bargains will be difficult.

“The Australian consumer has become accustomed to price deflation for a number of years and therefore retailers will find it challenging to pass these increase in product costs on to their customers,” Perlstein said.  

“Product differentiation will become even more important in order to compete and convince the customer that she is receiving value from her purchases.”

According to a report in the Herald Sun, Perlstein is in talks with the owner of the Victoria’s Secret brand, Limited Brands, to bring the products to Australia.

“We are developing a very close relationship with them so, hopefully, we can be their licensee here for all their brands. It’s very exciting,” Perlstein said.

Overseas fashion brands including Gap and Zara have flocked to Australia in recent months.