SMITHS CITY WARNS OF YEAR END LOSSES

By Wares April 17, 2018 Retailing

Trading update this morning warns of a year end net loss before tax of $7-8 million.

Smiths City warned on the NZX today that "tough trading conditions coupled with the impairment of leases on several persistently underperforming stores" mean the operation will post a loss for the year to 30 April 2018. 

The loss will be of the order of $1.25-1.75 million compared to a profit of $2 million last year.

The year's top line will also fall to $209-213 million compared to the $227 million posted last year. 

On top of the trading loss, Smiths City expects to make an impairment provision of $4.8 million relating to a "small number" of under-performing stores that, despite Smiths City's best efforts, are not expected to make a profit before their leases expire. 

All of which means the projected year end net loss before tax is forecast as $7-8 million compared to a profit of $2.4 million last year. 

As to the reasons behind these numbers, Chief Executive Roy Campbell says demand for core categories was weak in November and January and, despite improvements in February and March, "soft demand" not only led to heavy discounting around the market but also the proliferation of interest-free credit terms to "periods rarely seen in the industry".

These trends were "most pronounced" in Christchurch, Smiths City's home territory, which still produces a "significant proportion" of total sales. 

Elsewhere, the refurbishment and rebranding of the former Furniture City stores in Auckland (which are "not yet delivering to our expectations") and Whangarei and the closure of the Ngauranga Gorge store in Wellington in November have "weighed heavily" on the retailer's numbers. 

Smiths City will release its results for the year to 30 April 2018 in June. 

Read the full NZX update here.

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