Smiths City posted a 55% decline in after-tax profit for its year to April.
This follows weakening signs appearing in the retail sector during last quarter of trading.
Smiths City is in the middle of a five-year turnaround programme and is rolling out refreshed branding across its stores, and relaunching its finance offer in the face of increasing competition.
Revenue for the year grew 2.5% to $227.4million, net profit before tax rose 53.8% to $2million, while after-tax profit declined from $5.6million a year ago to $2.4million; last year's $5.6million having been bolstered by a $1.8million property sale. Last year, Smiths received a $2.5 million tax credit, compared to $400,000 this year.
Last year's 3.5c dividend was repeated, but fully imputed this year. Smith City shares rose 1.5% to 68c following the announcement, having a year ago been trading around 52c.
Smiths City chairman Craig Boyce said while acquisition Furniture City had delivered its first full year contribution to the group, it had ''struggled'' in the face of the trading downturn. Sales fell sharply in the last quarter's trading.
The Smiths City Finance division delivered strong earnings, but lost ground as competitors had ''aggressively expanded the availability of credit'', he said.
Refreshed branding would be rolled out in coming months to several stores, and financing would be made more competitive.
''We are cautiously optimistic that these changes will begin, in the second half of the year, to rebuild the recent momentum we have achieved in the business,'' Mr Boyce said.
In order for shareholders to benefit from the operational changes, Mr Boyce said he was seeking shareholder approval to distribute $5.7million through a compulsory share acquisition.
At the end of the year the core group had $12million cash on hand and all debt was carried against Smiths City Finance.
''Even after the planned capital distribution, the finance company, which enjoys one of the lowest loan impairments in the country, will be conservatively geared with net debt to assets of 15%.
''A level more than sufficient to weather a downturn or provide for further growth,'' Mr Boyce said.
Chief executive Roy Campbell said he had ''cautious confidence'' in the financial year ahead, but noted rural New Zealand was still recovering from the recession in commodity prices.
''The market is challenging, with demand for consumer durables weakening in the face of rising interest rates and housing market uncertainty,'' Mr Campbell said.
While Smiths City Finance revenue fell from $10.3million a year ago to $9.2million, its net profit before tax rose from $3million to $3.7million.
A ''key focus'' this year was for the finance business to be ''more relevant and better able to compete'', introducing an online approval process and engaging customers for the long term, rather than just financing a single purchase, Mr Campbell said.
He said working capital fell
by $2.3million during the
year.
The stock inventory was down more than 10% to $36.3million, a merchandise planner now ensuring the company promoted products customers were most likely to buy, as opposed to what was in stock.
