Furniture chain hit by tough trading
Furniture and appliance chain Smith City’s recent warnings have proved true and it will post a loss that may be as high as $8 million.
The bad news comes as chairman Craig Boyce steps down after 30 years with the company.
Chief executive Roy Campbell blamed tough trading conditions in several persistently underperforming stores.
‘‘We have to look at a couple of locations that have been challenging us. It’s not news anyone wants to hear but we don’t want to surprise the market more than have.
‘‘Although we saw some improvements in February and March, soft demand led to heavy discounting, often to unsustainable levels, and the expansion of interest-free credit terms to periods rarely seen in the industry.’’
The loss is a major blow for Smiths, which has had to shelve a planned special dividend to shareholders.
Next month’s annual report will reveal how affordable the policy is and whether Smiths will be a takeover target.
‘‘Trading in November and January was very tough. It also reflects our rebranding of our Auckland stores which has taken us longer than we thought.’’
The final figures are yet to be revealed but sales were down to between $209m and $213m, compared with the $227.4m posted in 2017.
Trading losses will be between $1.25m and $1.75m, compared with $2m last year but the impairment (writing down in value) of leases of $4.8m will take the final loss to between $7m to $8m for the year ending April 2018.
Last year the company posted a final $2m profit.
The $4.8m lease write-down was due to changing trading patterns, a shift in local conditions due to the opening of new retail hubs, and ‘‘onerous leases’’.
The result is still subject to April trading and the normal end-of-year review of the balance sheet.
Smiths had more recently rationalised stock, made merchandising improvements and staff changes, and refurbished shops.
Campbell said the changes delivered positive results for many stores, but in a small number of locations they made little difference.
Smiths City will post a big loss after ‘‘unsustainable’’ price cutting by its rivals.