Smiths City Group (SCG) is blaming a dramatic 71 per cent drop in after-tax earnings on a fall in big ticket retailing, customer financing and the property market.
One of Christchurch's largest retailers, which also owns Powerstore and Wellington's L V Martin, it announced a full- year profit of just over $1 million, compared with $3.56m last year.
Sales for the 12 months to April 30 fell 10 per cent, from $252.4m to $227m. Same-store sales fell 6.1 per cent.
The final dividend has also fallen, from 3c to an unimputed 1c per share, payable on August 14. This reduces the annual rate from 4.5c to an unimputed 2c a share.
Smiths share price fell 1c yesterday to close at 39c, after the late afternoon announcement.
Chairman Craig Boyce said all three of the markets SCG operated in - big-ticket retailing, customer financing and property - had been adversely affected by market factors.
Consumer confidence had impacted directly on retail demand, intense competition led to a fall in margins and it was unable to make a profit on the sale of its Gisborne store.
Last year's result included a profit of $606,000 on the development and sale of its Gore store and it had been hoping for a similar return in Gisborne, SCG managing director Rick Hellings said.
However, just after it bought the Gisborne store it was damaged in an earthquake and then the property market went into a downward spiral. SCG ended up selling the Gisborne store for book value.
Hellings said he was pleased with the company's sale performance given it was trading in a difficult market, particularly since Christmas.
Statistics New Zealand figures showed national furniture and flooring sales fell to their lowest level since 2002 and trading in appliances was down to 2004 levels.
SCG's furniture and flooring sales fell 9.3 per cent, but the market was down 16.2 per cent, demonstrating an improvement in market share, Hellings said.
Appliance sales had proved more resilient where flat panel televisions and falling prices had attracted business, but intense competition had seen margins at both the wholesale and retail level come under severe pressure, Hellings said.
SCG had managed to shave nearly $4m from its store and distribution expenses and more than $300,000 from its administration bill.
"The real thing is, the market is the market and we've done everything we can to alleviate that."
Hellings said it had reduced costs through the use of technology and the reduction of 45 staff in the last year, mostly through attrition but there had been one redundancy and five other staff had been offered redeployment but chose not to take it up.
SCG employed 800 people across New Zealand.
Hellings said he was feeling a lot more positive than he did a year ago about SCG's position. Improvements made in the past year had put it in a better position to take advantage of the market upturn when it did come, he said.
However, he was not expecting any improvement in sales for the rest of the calendar year.
Despite a drop in sales, SCG was still investing in the business and in the last year opened a new Smiths City store in Tauranga, moved the Lower Hutt branch of L V Martin to more modern premises and acquired Newbolds' Adelaide Rd branch in Wellington.
This year it planned to move both the Powerstore and Smiths City stores in Timaru to new premises and it was planning a major renovation of the Moorhouse Ave Powerstore.
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