American Freight losses weigh on Franchise Group’s Q4, 2020 results

But comp sales up as FRG prepares American Freight franchising push

ORLANDO, Fla. — Franchise Group, the owner of American Freight, Buddy’s Home Furnishings and other non-furniture banners, posted a fiscal fourth-quarter net loss of $4.2 million, or 12 cents per share, as American Freight and Liberty Tax cut into profits. 

Net sales for the quarter ended Dec. 26 were $2.15 billion.

The company, which has been building a portfolio of franchise-able brands, acquired American Freight just over a year ago and has been building onto it with banners it acquired before and after — Sears Outlet and FFO Home, respectively.

For the quarter, American Freight posted revenue of $214 million and a net loss of $9 million before adjustments. For the year, the chain generated $896.4 million in revenue and a $29.3 million loss.

Liberty Tax was a drag in the quarter, too with a $16.2 million loss while Buddy’s, Franchise Group’s lease-to-own operation,  did $22.1 million in the quarter and posted $4.1 million in net income. Same-store sales from both American Freight and Buddys were “north of 3%,” President and CEO Brian Kahn said on a conference call with the investment community.

“Operational priorities for 2021 include accelerating our franchising efforts,” which means different things for the different brands, he said. 

“For American Freight and The Vitamin Shoppe, that means going to market aggressively for the first time with newly created franchise programs and infrastructure,” he said. “For the more established Buddy’s and Pet Supply franchise programs, our focus … will be on accelerating their growth and providing world-class support to both new and existing franchisees.”

Franchise Group took a step in that direction late last year when it re-franchised 47 of its Buddy’s RTO stores to apparel retailer Bebe in a $35M deal. That move is expected to cut into revenue this year by about $35 million and decrease annual adjusted earnings before interest, taxes, depreciation and amortization by about $6 million, it said. But as the company noted in November, longer-term, the move deleverages the overall corporation and sets the stage for more growth. 

In issuing its 2021 outlook for revenue in the $3 billion to 3.1 billion range, net income of at least $40 million and adjusted EBITDA of at least $310 million, Kahn said the budget excludes any assumption related to this next round of government stimulus (which has yet to be signed into law before last week’s call). At the same time, it does include “our expectations of continued supply chain constraints, which have also led to elevated product and freight costs.

“That said, we’re pleased with the resiliency of our brands, despite these challenges and look forward to an easing of supply constraints over time.”

Separately, FRG signed an agreement to essentially sell its Liberty Tax business to NextPoint Acquisition Corp in a $243 million cash and stock deal, which merges Liberty Tax into a year-round financial platform and gives Franchise Group an ownership stake in NextPoint.

It also completed its acquisition of Pet Supplies Plus. For the full year, Kahn said the company expects revenue growth at American Freight, The Vitamin Shoppe and Pets Supplies Plus.

Clint Engel

Clint Engel is a veteran home furnishings industry journalist and executive editor of Home News Now. Please share your feedback with him at

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