By Jenny Ruth
Wednesday 7th July 2010
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Home furnishings and appliances retailer Smith City Group is being affected by falling demand for 'big ticket' items and, despite maintaining market share, saw its same-store (stores open 12 months or more) sales fall 3.8% in the year ended April, says McDouall Stuart.
While its profitability is below the norm, it is improving with cost control and the closure of unprofitable stores, the broker says.
South Island-based Smith City bought 80% of Wellington-based LV Martin in November 2004 and then expanded further into the North Island and now has 16 North Island stores in addition to 30 in the South Island. "The company anticipates further new stores in the Wellington region to take advantage of local logistics and recent withdrawal of competitiors," it says.
Smith City expects difficult trading conditions to continue in the current year but expects profitability to improved from better working capital management, lower operating costs and improved efficiencies through investment in point-of-sale and other technologies, McDouall Stuart says.
It is forecasting net profit will rise from $3 milion in the year ended April to $3.2 million in the current year and to $3.6 million in 2012. It values the shares at 71 cents, more than double the current share price.
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