Sharechat Logo

Postie Plus to sell its Babycity chain

Wednesday 11th April 2012

Text too small?

Clothing retailer Postie Plus Group said it will sell its Babycity chain of stores to a private equity-funded company led by former LV Martin chief executive Trevor Douthett.

The sale price wasn't disclosed but the transaction does require shareholder approval, implying the price is more than half Postie Plus' market capitalisation – NZX listing rules require shareholder approval for such transactions.

Chief executive Ron Boskell confirmed the sale price is between $4 million and $5 million. With the shares up 2 cents, or 8.7 percent, to 25 cents, the company's market capitalisation is currently $10 million.

The shares troughed at 18 cents last September before rising to 32 cents in January but have eased since.

Chairman Richard Punter said Babycity does not fit the business model and growth strategy of the group. Postie Plus owned the Babycity business, now 18 stores following the closure of 6 stores since August last year, when it floated in 2003.

“The sale of Babycity is an important step to reconcile our business model to that of Postie Group and our flagship retail brand,” Punter said. The company currently has 81 Postie Plus stores.

“We believe that the group should eventually be twice the size that it is today and, while some of that growth will be organic, we intend to acquire complementary brands that we have identified to further develop our retail footprint nationwide,” he said.

The sale is expected to settle in early May.

Boskell said while the Babycity brand is a good one, it hasn't added anything to the company's bottom line. Another two stores are earmarked for closure over the next couple of months as leases expire, he said.

By contrast, the Postie Plus chain “has been showing continuing growth every year for the last three years,” he said.

Postie Plus hasn't had much luck with brands other than its flagship chain. It sold its Arbuckles homewares chain to Kathmandu founder Jan Cameron, who owns 19.9 percent of Postie Plus, in 2008 and in the couple of years after its float phased out a couple of other women's wear brands, Rendells and Gardner Fashions.

Boskell said Postie Plus' $100 million a year in sales is still “a little bit light” for a listed company. While the company's track record with so called complementary brands hasn't been good, “we've got the experience of what not to do, which is helpful.”

The group's back office is now “very solid” and any business it purchases “will be able to concentrate wholly and solely on the retail end and not on the back office,” Boskell said.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Pumpkin Patch today's best NX50 performer after return to profit in 2013
Postie Plus expects loss in 2013 earnings as sales fall 10.5 percent
Postie Plus appoints No 1 Shoes executive Binns as new CEO
Postie Plus 3rd-quarter sales from continuing ops fall 14 percent on stock disruptions
Postie Plus reels from outsourcing woes as 1H loss widens, burns through cash
Postie Plus gains extension of banking facilities, avoids breach
Postie Plus warns of further potential breaches of banking covenants
Postie Plus renegotiates banking covenants because of potential breach
Postie Plus posts full-year loss on costs
Postie Plus FY sales fall 4.4% on sale of Babycity, flat Postie revenue