Smiths City 4-month sales slip 2% on store closures, weaker rural demand

Tuesday 25th August 2015

Smiths City, which is selling its flagship Colombo St store in Christchurch to repay debt, said sales fell in the first four months of the year after it shuttered unprofitable outlets and spending dipped in rural areas.

Sales in the new financial year started May 1 are down 2 percent on the year earlier, chairman Craig Boyce said in notes for delivery at the company's annual meeting in Christchurch today. Excluding the impact of store changes, sales were up 1 percent, he said.

Smiths City says margins at its LV Martin and Powerstore appliance outlets are too low to be profitable and it had closed four of the outlets last year and a further three in the first quarter of this year, leaving only four "appliance only" stores remaining. The company said its sales and margins have been under pressure since Christmas and it is reviewing its operations and costs to eke out efficiencies.

"Change must happen to be profitable and successful in the future," Boyce said. "Unprofitable stores must have a business plan to be profitable or they close."

A decline in dairy prices, New Zealand's largest commodity export, has prompted some economists to revise down their expectations for economic growth in the coming year, and its impact on the country's terms of trade prompted the central bank to start cutting interest rates in June.

"We are seeing reduced spending in rural centres like Ashburton, Timaru, Oamaru, Greymouth and Gore – but is not a surprise and we are confident we are holding market share, particularly in the higher margin furniture, flooring and bedding markets," Boyce said.

Smiths City shares dropped 2 percent to 50 cents, in line with a 1.9 percent drop in the S&P/NZX All Index today. The stock has declined 5.6 percent this year, compared with a 2.2 percent drop in the broader index.

BusinessDesk.co.nz

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