Smiths City trims loss following store closures
Furniture and appliance retailer Smiths City has closed stores to counter softer consumer demand.
Company chair Alastair Kerr said to continue to build resilience in their business, they must respond to variable market conditions.
Key initiatives included closure of underperforming stores across the country and investment in stores where they see strong potential.
The company closed stores in Queenstown and Gisborne, leaving 32 stores open. These followed on the closure of stores in Ngauranga Gorge and Riccarton in the previous corresponding period when it ended the year with 34 stores.
“Since the end of the financial year this programme has included the rationalisation of the Auckland footprint,” Campbell said. “This decision does not diminish our commitment to the upper North Island.”
“The challenge remains – in Auckland and in other regions – to better articulate our proposition in store and online and do so in stores that are in the right locations and of a size most suitable to that location.”
In its financial year report, the retailer posted a net loss of $1.7 million in the 12 months to April 30 compared to the $7.2 million loss in the previous corresponding period. Group net losses before tax narrowed to $1.9 million from $9.9 million in the prior year.
The company reported a 4.4 per cent decline in revenue at $206.4 million, following store closures and slower trading in the second half of the year.
Smiths City said the report showed improvements in earnings and same-store performance as it makes progress in its transformation programme. It also reflected a softening in New Zealand retail demand in the second half of the year, particularly in Smiths City’s core furniture and electronic goods categories.
Same-store sales (store revenue excluding stores closed during the year) rose 2.8 per cent to $192 million from $187 million as the group starts to see results from a strategic reset initiated in the first half of the financial year.
According to the retailer, the online store was the standout performer.
“It grew its sales very strongly to make it one of Smiths City’s larger stores,” Smiths City said.
Meanwhile, in the first half of the year, the company benefitted from a strong contribution to its commercial operation, which provides furniture and appliances to businesses across the country.
Chief executive Roy Campbell said Smith’s City’s 2019 financial year was a game of two halves. In the first six months, it generated strong growth in revenue flowing from the company’s centenary celebrations, strong sales in the commercial business, and growth in the online channel.
“Over the last year Smiths City has accelerated its transformation,” said company chair Alastair Kerr. “The strong gains we saw in the first half of the year, when we celebrated our centenary, have not been sustained in the second half.”
“This was particularly the case during the crucial Christmas trading period and it continued into the remainder of the financial year, partly reflecting the softening in house prices and consumer confidence.”
The company said as of April 30, 2019 the company had $6.4 million of cash on hand, up from the $6.2 million held at the same time a year ago and $2.3 million at the end of October. Net interest-bearing debt stood at $65.0 million, up $4.1 million on the same time a year ago.
The increase in debt was used to fund working capital. All borrowings are secured against finance company receivables.
Smiths City said in light of these results and the continuing need to invest in the business, the board had retained its view that it is not yet appropriate to pay a dividend.