If the tunes are on, the dog’s in the back and the windows are down, it’s no ordinary commute.
This is a road trip.
And, when on a road trip, one must respect the time honoured tradition of the servo stop, which often means food.
I grapple with the choice between a decadent salted caramel frappe from McDonalds that will take years off my life, or the green smoothie from Oliver’s Real Food (ASX: OLI) that I know my body will probably appreciate.
But, smoothies don’t go as well with hot chips, as Oliver’s is finding out.
The embattled health food restaurant chain is trying to keep their heads above water after COVID put a stop to any and all road trips. The Company has been limping along since 2019 when, in January their stock took a decline following the release of downgraded profit guidance for FY19.
That was just the beginning of their troubles, with border closures, lockdowns, fires and floods all dampening people’s road tripping enthusiasm.
In an effort to stay alive, the Company restructured, eliminating unnecessary head office level expenditures that were labelled “excessive beyond comprehension” in 2019 by founder and then re-appointed CEO Jason Gunn.
Gunn previously left in 2018 after the Company fell short of IPO expectations but rejoined in 2019 to steady the ship.
Interestingly, Gunn departed the Company for the second time in a three year period back in early 2021, but not before reducing losses for the half year ended December 2020 by $1.69 million. It is important to note that JobKeeper significantly subsidised the business to the tune of $3.44 million.
Fast forward to 2022 where Gunn’s brief triumph grows more lacklustre by the day with losses for the FY22 half year increased by 319.5% to $12.6 million. The Company is concerningly deeper in the red compared to the first half of FY22 where their losses came in at $3 million.
The reason for this monumental increase in loss was $10 million worth of impairments resulting from the closure of four Victorian stores, and applying discounts to others.
In their half year report, the Company noted that they had restructured yet again to aid in their bounce back from COVID disruptions. To reduce overheads by $4 million, the Group decided to close all of their commercial kitchens, warehousing and cease logistical activites, instead outsourcing these to contractors and other industry experts. The Board of Oliver’s maintained that had this restructure not have happened, they’d not have survived much longer.
At that time, despite COVID restrictions being eased and road trips having recommenced over the summer, Victorian stores remained at 58% of their pre-COVID levels, “a trading pattern which has been resistant to all corrective attempts by management and has therefore continued to concern the Board.”
Consequently, the Board opted to close four Victorian stores, deepening their losses for the half.
The Company noted that with their cash flow “under extreme pressure”, had it not been for the support of principal lenders, Michael & Suzanne Gregg, and Gelba PTY LTD, they would have been long gone.
Now, Oliver’s is seeing a slight lift in store performance, reporting that compared with 2021, NSW is up 8.97%, Victoria is up 51.87%. Queensland however is down 15.10%.
Same store sales are up by 16.05% on 2021 sales, but still below pre-COVID levels being down 11.79% compared to June 2019.
The Company is moving onto Phase 2 of their restructure plan which will monitor the Victoria store networks’ performance and see renewed investment in the menu and marketing. A marketing push will focus on brand awareness and pushing online sales.
Perhaps Aussies will find a renewed love for smoothies over frappes, or sweet potato chips over oil soaked fries… but who knows. The Company’s activities over the coming months will be very telling. After all, investors only get so much information about what goes on behind closed doors, and something tells me the higher ups at Oliver’s haven’t been innocently sipping smoothies all this time.
Samantha Freidin is a business journalist at Emerald Financial whilst also completing a Masters of Marketing and Digital Communications at Monash University.
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