Postie Plus Group Makes Gains

19 March 2009

Postie Plus Group Makes Gains in First Half Margins and Savings

Key Results for the six months ended 31 January 2009

§    Total Group operating revenue $49.9m, down 5.0% over prior H/Y, but margins continuing to improve despite very difficult retail climate

§    Q1 sales down 8.78% but Q2 sales down just 2.3% with improved margins in key selling period

                                           Quarterly Sales Analysis (excluding Arbuckles)

2008-09

$’000

2007-08

$’000

Variance

%

Q1 Sales to 31/10/08

19,926

21,844

(8.78)

Q2 Sales to 31/1/09

29,986

30,697

(2.32)

Total

49,912

52,541

(5.00)

§    First half net loss after tax eased to $2.68m from $2.91m for the corresponding period last year; on track to deliver modest full year profit in generally stronger second half, provided recession does not worsen

§    Inventory levels down 30% over same period last year with reduction in costs, faster stock turns and minimal stock overhang entering winter sales period

§    Inventory reductions contribute to savings in finance and interest costs and to healthier cash flows

§    Bank debt reduced year on year by $6.0m or 32%

§    Significant efficiency gains from centralised apparel distribution centre with savings ahead of target

§    All forward orders for second half covered at favourable exchange rates

§    The “Now that’s smart” Postie+ brand offering is gaining continued loyalty with its fashionable but competitively priced ranges of apparel, sleepwear, lingerie and beauty products fit for the whole family

§    The Postie+ reward card loyalty programme growing sharply with 165,000 shoppers signed up in first three months

§    Schooltex performed strongly in the Back to School period and poised for ongoing growth

§    Five new Baby City stores opened during the period.  The Bub Club loyalty programme and on line shopping options proving popular with new parents.

Postie Plus Group has posted a slightly improved net loss after tax for the half year ending 31 January 2008 of $2.68 million from $2.91 million for the corresponding period.  This was based on lower sales revenues of $49.9 million, down 5.0%, in a climate marked by deteriorating consumer confidence and intense retail competition.

Directors have decided that no interim dividend will be paid in light of the current economic environment and the company’s results.

“The first quarter was sluggish, but the second quarter showed a marked improvement with sales down just 2.3%, with improved margins,” Managing Director and CEO, Ron Boskell said. “This was a good result considering the state of the market and the rocky start in the first quarter when retailers had to battle for every sale.”

Mr Boskell said that margins were continuing to lift and the Group has entered the second half with a clean stock position for the crucial winter selling period. 

Inventories were down 30% in total compared with the prior first half with apparel inventories reduced by 15%.  The business was also benefiting from gains from cost containment and operational efficiencies that have been implemented as part of the company-wide profit improvement programme. 

Coupled with savings from the lower inventories, bank debt has been reduced by $6.0 million, or 32%, compared with the same period last year.  Savings in finance costs will come through in the second half.  PPGL continues to enjoy funding support from it bank for ongoing facilities.

The refreshed Postie+ brand is continuing to increase its market share, providing shoppers with smart choices with its comprehensive, competitively priced, fashion ranges, available through its nationwide network of 79 stores.  Feedback has been overwhelmingly positive for the brand’s new face, popular New Zealand personality, Jayne Kiely.

BabyCity now has 21 stores around the country, with new store openings in the first half in Hastings, Blenheim, Coastlands, Whakatane and New Plymouth.  The brand has continued to perform strongly.

Schooltex, which supplies a comprehensive range of generic uniforms to over 1500 primary, intermediate and secondary schools, also delivered good first half results and ongoing growth was anticipated

Mr Boskell said PPGL was well positioned to capture winter sales and any upturn by focusing on providing a genuinely accessible and appealing value offering that does the basics brilliantly.

 “While the trading environment is expected to get even more competitive, the company is currently on track to achieve our full year targets,” he said.

“We started the 2008-09 year in a much stronger position than we have been in for some years.  We were free from the crippling stock overhang we have had to contend with since 2006, the legacy of inefficient warehousing, logistics and retail delivery systems and Arbuckles’ accumulating losses. Our profit improvement programme, initiated in April 2008, is continuing to gain traction.

“We are quietly confident that we will turnaround the losses at the end of the current financial year as we continue the momentum achieved to date through our focus on customers first, recovering profitability and positioning our brands for sustainable growth.  But, we anticipate it will be a late run in the final quarter for us to reach the line and deliver the modest profit we seek.”

ends

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