Smiths City Group said trading remains “very challenging” as it reviewed the feasibility of some of its appliance stores.
The NZX-listed retail company, which is selling its flagship Colombo St store in Christchurch to repay debt, said sales fell in the first four months of the year after it shuttered unprofitable outlets and spending dipped in rural areas.
Chairman, Craig Boyce, said in notes for delivery at the company’s annual meeting in Christchurch that sales in the new financial year started May 1 are down two per cent on the year earlier.
Excluding the impact of store changes, sales were up one per cent, he said.
In June the Christchurch-headquartered company reported that trading profits fell in the 2015 financial to $2.6 million from $5.6 million in the prior year. Its full year revenues totalled $221.4 million.
Currently Smiths City says margins at its LV Martin and Powerstore appliance outlets are too low to be profitable. It closed four of the outlets last year and a further three in the first quarter of this year, leaving only four “appliance only” stores remaining. The company said its sales and margins have been under pressure since Christmas and it is reviewing its operations and costs to eke out efficiencies.
New CEO, Roy Campbell, said the group had closed stores in Nelson, Timaru as well as an LV Martin store in Kapiti Coast, north of Wellington, since his tenure with the company earlier this year.
The company has two Powerstore appliance outlets in Moorhouse Ave and Northwood in Christchurch and two LV Martin stores in Adelaide Rd, and Ngauranga Gorge in Wellington.
“Smiths City, like other retailers, is finding it very tough in that appliance only format,” Campbell said after the annual meeting. “The management team had prepared a strategy paper on the remaining four stores to present to the board.”
Australian appliance retailer Good Guys pulled out of the NZ market within the last year.
Options could include rebranding the stores to the core Smiths City brand and including furniture and other items in the sales format or exiting the properties.
“Change must happen to be profitable and successful in the future,” Boyce said. “Unprofitable stores must have a business plan to be profitable or they close.”
A decline in dairy prices, NZ’s largest commodity export, has prompted some economists to revise down their expectations for economic growth in the coming year, and its impact on the country’s terms of trade prompted the central bank to start cutting interest rates in June.
“We are seeing reduced spending in rural centres like Ashburton, Timaru, Oamaru, Greymouth and Gore – but is not a surprise and we are confident we are holding market share, particularly in the higher margin furniture, flooring and bedding markets,” Boyce said.
Smiths City shares dropped two per cent to 50 cents, in line with a 1.9 per cent drop in the S&P/NZX All Index yesterday. The stock has declined 5.6 per cent this year, compared with a 2.2 per cent drop in the broader index.
