Smiths City hit by tough trade
Christchurch-based 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. These trends were most pronounced in Christchurch, where we operate our largest outlets and generate a significant proportion of our total sales.’’
The loss is a major blow for Smiths, which has been forced to shelve a planned special dividend to shareholders.
The annual report next month will reveal how affordable the policy is and whether Smiths will become a takeover target.
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. 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 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.
‘‘The disruptions to trading caused by the refurbishment and rebranding of the former Furniture City stores in Auckland and Whangarei and the closure of the Ngauranga Gorge store in Wellington in November have weighed heavily on the results,’’ the company said.
‘‘The rebranded Auckland stores, which reopened at the start of December, are not yet delivering to our expectations.
‘‘Although we are making strong sales of appliances – a category previously not available in the former Furniture City stores – furniture sales are yet to recover to levels before the rebrand. This reflects a regional customer base that is still familiarising itself with the Smiths City brand as well as the broader market challenges.
‘‘Three years ago, we started on a programme to transform Smiths City. This began with the closure of the Powerstore, Alectra and Furniture Concepts business units and the rationalisation of group distribution and administration centres.’’
Smiths had also made merchandising 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.
Meanwhile, Smiths has appointed independent director Alastair Kerr to replace Boyce, who will retire at the end of May. Boyce began as general manager in 1988 and became chief executive in 1990. He held the post of chairman for 19 years.
In addition, independent director Gary Rohloff is resigning at the end of April.
Smiths was founded in Christchurch in 1918 and floated on the stock exchange in 1972. It operates 35 shops.