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Telstra hits Vita Group with clawback plan for 104 branded stores

Business

Brisbane’s Vita Group will lose 104 of its Telstra-branded stores just months after it struck a new deal with the communications giant.

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The announcement stunned investors and the share price slumped 28 per cent to 81 cents this morning.

Telstra announced yesterday that it would bring all branded outlets in-house affecting the 104 owned by Maxine Horne’s Vita Group and another 166 licensee stores.

The decision appears to have been brought about by the acceleration of online consumerism since the pandemic hit.

But Vita said its contracts with Telstra mean the clawback of stores would not occur until 2025, a timeline confirmed by Telstra. The transition for the independent licensees would occur over the next 12 to 18 months.

“For Vita Group, conversations will begin today about next steps,” Telstra said.

Investors may have sensed something was coming. Vita’s share price took a sudden 3 per cent downturn on Wednesday.

Vita’s ICT channel, which included the Telstra-branded stores, delivered $770 million in revenue last year.

Vita has other revenue streams from its skin and wellness centres as well as 300 Sprout accessories stories. In 2017 it extended its Telstra partnership until 2023.

Telstra’s group executive of consumer and small business Michael Ackland said the move was required to keep pace with the growing digital economy and give Telstra more flexibility to respond to customers.

“This was not an easy decision given that we have enjoyed a long term partnership with many of our licensees,” he said.

“As more customers interact with businesses online, resulting in changes to the broader retail industry, we think now is the right time to bring back full ownership to further develop a consistent and integrated customer experience across our online channels and store network.”

Vita chief executive Maxine Horne said the company was strategically prepared for a range of outcomes and had been investing in skin care and wellness for some time.

“We have a 26-year partnership with Telstra and are committed to working professionally with them to ensure the best possible outcome for all parties,” Horne said.

Telstra also announced a half year profit of $1.1 billion within an EBITDA (earnings before interest, tax, depreciation and amortisation) of $4.1 billion, down 14.7 per cent

An interim dividend of 8 cents a share will be paid.

Chief executive Andrew Penn said Telstra can see a clear path ahead, after a decade of disruption from the NBN and its own T22 strategy.

“There is a lot of work ahead of us, but I remain confident we can achieve our financial ambitions including for an underlying EBITDA of between $7.5 billion and $8.5 billion and a return on invested capital of 8 per cent by 2023,” Penn said.

Its guidance for the second half was for underlying EBITDA of between $3.3 billion and $3.6 billion.

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