Clive Peeters has announced a net operating profit of $1million dollars this is 90% down on the same period in 2007/2008 financial year. It follows a 29% decline by Harvey Norman earlier in the day.
Sales fell 0.2% to $266.7M compared to $267.2M in 2007. Comparable sales declined 10.3%. Net operating costs to sales ratio was 21.8%.
Although Clive Peeters headline sales were only 0.2% below H1 2008, like store sales fell by over 10%, and increased operating costs associated with additional stores and a reduced gross profit margin contributed to the sharp decline in their profits the Company said
Clive Peeters CEO said that he was competing in the worst conditions for 30 years. Managing Director Greg Smith commented “the conditions for big ticket discretionary retail over H1 2009 have been more challenging than I can recall in my 30 years in this industry. Consumer sentiment was already at 16 year lows entering the period, and this reflected in floor traffic across all stores and in all States in which we operate being down an average of 10%. This fed directly into our sales reduction over the half.
The factors which contributed to a sharp slowdown in sales for the fourth quarter of FY 2008 – high interest rates, high fuel costs and depressed housing markets – continued into Q1 2009 and were exacerbated by the global financial sector crash and its resultant credit squeeze mid way through the half year. The uncertainty caused by these events and fear of job losses have seen consumer confidence fall to record lows”.
Greg Smith added “with sales under significant pressure this caused increased competition and a sharp fall in gross margins over H1 2009 – the Company’s first margin decline in over 15 years, which says a lot about how challenging this retail environment is.
Our net operating cost to sales ratio increased from 20.2% in H1 2008 to 21.8% in H1 2009 but this was largely due to the sales decline over the half and the cost of new stores. We achieved our objective of reducing underlying operating overheads during H1 2009 by $12m on an annualised basis, and with a continued focus on operating costs we intend to remove at least another $9m of annualised costs in stages over H2 2009. The full annualised impact of these combined cost savings will be reflected in FY 2010.
The Company realised that with the sharp slowdown in big ticket discretionary retail sales in Q4 2008 the environment was certain to deteriorate more over H1 2009, and we acted quickly and decisively to reduce our operating costs. We also reduced inventory levels by $21m over the period. The inventory run down improved our cash flow and strengthened the liquidity of our Balance Sheet.”
Commenting on the Company’s Sydney operation, Greg Smith announced “we are pleased that there is continued improvement coming through in that State despite the very depressed New South Wales retail conditions. Sales in H1 2009 fell 7.6% on the corresponding period of the previous year, the best performance of our eastern states operations. Our operating costs in Sydney were managed very carefully over the period and the final result was $1.6 million net operating loss after tax for H1 2009. This compared to the H2 2008 Sydney loss of $1.8 million after tax, and to the H1 2008 Sydney loss of $2.6m after tax, so we are encouraged by this trend.
We were pleased that despite lower purchases in line with the inventory reduction programme which caused a loss of $4m of rebates over the half we were able to convert a Q1 2009 Operating Loss into an operating profit before tax for Q2 2009 of $3.2m. The result would have been further improved were it not for industry shortages in Panel TV stocks which emerged because of the strong sales uplift across the Industry in the month of December.”
Greg Smith stated “these times demand strict management of inventories and cash flows, and we are doing well in these two areas. Capital expenditure is under a tight hold, and no new stores are committed to or planned for calendar year 2009.
However on a positive note our pilots for kitchen and bathroom renovations (Moorabbin and Thomastown) and for a range of new technology, software and gaming product (Moorabbin) have both been launched in recent months and are showing promising early results. We expect these product and services innovations to represent a platform for like stores sales growth as we roll them out to other stores when the retail cycle improves.