Aussie retailer hit by NZ Customs ruling

Review_new_storeReview, JETS and Designworks owner PAS Group has downgraded its earnings guidance, citing a continuation of difficult trading conditions over Christmas and delays to wholesale orders.

The dual wholesaler/retailer now expects first-half earnings before interest, tax, depreciation and amortisation (EBITDA) of between $8 and $8.5 million, around 28 per cent lower than the $11.6 million in earnings it booked for the first-half of FY17.

The guidance includes $1 million in non-recurring costs relating to Coliseum Capital’s takeover, strategic consulting costs and an unfavourable NZ customs duty ruling. Like-for-like sales in the Review and Black Pepper businesses were down on last year in the first eight-weeks of FY18, but the company did not specify how its individual brands performed over Christmas.

Australia’s PAS Group, whose suite of retail brands include Review, Black Pepper and JETS, says its first-half earnings will be weighed down by a New Zealand Customs decision that didn’t go its way last year.

In 2016, the Victoria-based retailer won a $1.08 million refund from overpaying duty on Black Pepper products imported into New Zealand between 2005 and 2010.

However, last year a decision on the level of interest accrued from the overpayments didn’t go as far as PAS had anticipated, a spokeswoman said.

That meant the retailer had to reverse the proportion of interest it had expected but didn’t receive.

This contributed to A$1 million of one-off costs in the six months ended December 31 alongside costs related to a takeover bid for PAS from cornerstone shareholder US-based Coliseum Capital Management and consulting fees on US expansion opportunities for the retailer.

Plans are also in the works to relaunch Review’s websites to expand its digital capabilities, particularly enabling transactions with foreign currencies as part of a broader ambition for the brand that could see it launch into other international markets in Asia and America in the coming years.

PAS brought on Boston Consulting Group to begin testing its products in the states, a market that its swimwear brand JETS already trades in.

PAS also announced that Designworks has secured a distribution license for UK-based sportswear brand Lonsdale, with shipments to be delivered to its major retail partner Target before the end of the month. Further negotiations are ongoing for the acquisition of a further ‘major sports brand’, which Morris said could be announced as soon as next week.

It follows Designworks winning a tender to design and supply supermarket giant Coles’ new range of apparel for its women’s Mix program, which is expected to deliver $15-20 million in revenue annually starting in FY19. Morris expects the initiatives to put the wholesale arm of the company on better footing, after it booked a 9.5 per cent decline in revenue in FY17.

Although the Lonsdale and Coles arrangements will do little to bolster FY18 prospects, Morris said.

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