Smiths City is banking on holiday trading after profit sinks

Friday, 22 December 2017

It hasn't been a great year for Smiths City.

Christchurch-based retailer Smiths City's executives are awaiting results of Christmas trading with bated breath after posting just $20,000 in profit on turnover of $108 million for the the six months ending October.

Managing director Roy Campbell said he was cautiously optimistic but didn't expect much change in conditions.

'Maybe Sunday's trading will bring the last minute shoppers out. People have been very considered in their purchases this year.'

Smiths has just rebranded two Furniture City stores it owns in Auckland and one in Whangerei to tap the wallets of northerners.

Smiths City hopes shoppers will buy big ticket items these holidays.

* Bricks and mortar still a winner for Smiths City chain**

'We are excited by the opportunities we see in the upper North Island, where strong demand for housing should underpin the performance of these stores for the long term.

'However, lending restrictions on real estate, significant reductions in home sales, and uncertainty in leading up to the election weighed on consumer confidence and spending on the home.'

Retail rivalry was intense in home electronics, digital products and whiteware, which were particularly exposed to competition from online retailers, Campbell said.

The cost of rebranding and temporary loss of revenue from these shops exacerbated the tough trading conditions, and a new store opening in Hastings failed to arrest an overall decline in revenue of 5 per cent over the six months under review.

October trading, which traditionally begins to show strength, was down 4 per cent.

When Smiths directors became aware of the poor trading and muted outlook in October they shelved a planned $5.7 million capital repayment to shareholders.

Campbell said that since the rebranded 'live better' Whangarei shop opened earlier this year it has delivered sales 17 per cent ahead of the same period a year ago.

The latest board initiative has been the recruitment of Alastair Kerr and Ben Powles.

Kerr is a professional director who has held executive roles with Marks and Spencer, Mothercare, Virgin, The Body Shop, L'Oreal and Williams Sonoma over 35 years. He currently chairman of UK based kitchenware retailer Steamer Trading, Cognition Education in Auckland, UK brewer Fuller Smith and Turner, and Paper Plus.

Powles is chief executive of online retailer World Front/Fishpond. He started his career as a lawyer before switching to technology companies.

A new Auckland distribution centre has given supply chain efficiencies, and employee costs fell 6 per cent to $15.5m.

The directors have declared a fully-imputed interim dividend of 1cent a share.

The company had net cash and cash equivalents of $9.9m on hand and total debt of $55.9m held against Smiths City Finance receivables.

Smiths City Finance revenue fell to $3.8m from $4.6m in the corresponding prior period but profits increased 7.5 per cent to $2.4m. Customer loans stand at $64.7m.