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New Smiths City chair pulls no punches about failing retailer at AGM

Wednesday 5th September 2018

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Chronic underinvestment, a lack of understanding of what customers want, and seriously deficient IT systems were just some of the criticisms laid by incoming Smiths City chair Alastair Kerr on his predecessors at the company’s annual general meeting today.

Kerr said the furniture and appliance retailer’s shocking 2018 result - a $7.2 million after-tax loss in the year to April 2018, compared with a $2.4 million profit the previous year - came off the back of underinvestment in information systems and in the store network, and in some areas from losing touch with its customers.

“Many of our stores have not kept pace with expectations on how products should be displayed and sold,” Kerr told investors in Christchurch today. “We have not been selling the products customers want and we have not been making the most of the customers that walk in the door.

“Our patchwork of legacy systems at best results in delays in answering customer queries and processing transactions. At worst, it disappoints them with inaccurate information, or results in poor customer fulfilment.

“Our current systems also give us little insight into what is driving customer behaviour.”

Smiths City was founded in Christchurch in 1918 by Henry Cooper Smith as an auction house for grain and produce, and Smith later branched into auctioning livestock and reconditioned farm implements.

But the centenary has brought little joy for the retailer, apart from a shindig in Christchurch. Revenue for the 2018 year was down 5.1 percent to $215.9 million from $227.4 million, and pre-tax earnings slumped from a $2 million profit in the 2017 financial year to a loss of $9.9 million this year.

The company took a $4.9 million hit for leases on unprofitable stores it had to close, including all the appliance-only stores. And it was stung for $1.5 million by an Employment Court decision in May that staff attending so-called “voluntary” morning meetings, held in all stores before they open each day at 9am, must be paid for being there.

The retailer also announced in July this year that as part of a renewed commitment to staff, it would be paying at least the living wage of $20.55 in 2018 to all employees from the beginning of October.

In a frank new-broom-sweeps-clean speech at the AGM, Kerr pointed to significant board changes. In May, Kerr replaced former chair Craig Boyce, who had spent 30 years with Smiths City. Kerr has experience with retailers Marks and Spencer, Mothercare, Virgin, and The Body Shop. Two other new-ish board members, Ben Powles and Tony Karp, replace Gary Rohloff and Sheena Henderson.

But turning around the retailer wouldn’t be easy, Kerr said.

“What I want to make clear is that this is not going to be a quick fix, nor is it going to come cheap. Significant investment in the basic infrastructure of the business is required. We need to continue to refresh our store formats and implement modern information systems ... We also need to continue to invest in the product range and the training and development of our people.”

Only when the company “is growing and sustainably and generating cash in excess of its investment requirements” will it start paying a dividend again, Kerr said. Dividends were suspended in June.

The shares were unchanged at 34.5 cents, having slumped 43 percent so far this year. 


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