Blames advertising campaigns.

Godfreys like-for-like (LFL) sales have dropped 27% compared to the same time last year in the two weeks since the company’s trading update on 23 April, 2018. Year to date LFL sales are currently down by 7.8% compared to last year.

Godfreys has attributed the decline to changes made to its TV advertising campaigns in April and May, designed to reduce reliance on a discount and sales based approach and focus more on product features and benefits.

“These changes have not resonated with Godfreys existing customer base and as such, the company has reverted to the previous TV advertising approach for this segment of the market. Godfreys will continue to test refinements to the product feature and benefits approach through digital channels to target a broader customer base that the company is currently not attracting,” the company said in a statement to the Australian Securities Exchange (ASX).

Godfreys now expects underlying EBITDA for FY18, before restructuring and one-off costs, to be approximately $3.5 million. However, should LFL sales continue to decline in excess of year to date performance, the final EBITDA result for FY18 could be below this expectation.

As a result, Godfreys considers it likely that it will be in breach of both the Leverage Ratio covenant and Fixed Cover Charge Ratio covenant under the Facility Agreement for the financial year ending 29 June, 2018. The lender has agreed to waive its rights should a breach occur.