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HomeOPINIONMajor retailers closing their doors

Major retailers closing their doors

About two years ago, consumers were receiving signals from Dick Smith Electronics that the company was not trading well. Whilst the rumours continued through to Christmas 2015, customers continued to make purchases from the group stores throughout New Zealand. However by January 2016, it was apparent that Dick Smith would close and with that went the certainty of the retention and value of the Gift Vouchers that had been purchased during the previous Christmas buying spree. Thus all value was lost as a result of that closure.

The recent announcement by JB – Hi Fi management that they were finalising a performance strategy for its New Zealand discount electronics chain, following a sales and margins decline in the last financial year, had a similar ring to it of the Dick Smith saga. Apparently JB HI FI have had about a $2.7 million dollar loss over the past financial year. One doesn’t have to be an Einstein to accept that as a signal that JB HI FI may not be about for much longer. In fact they have closed their store at Westgate in Auckland and it must be likely that more will follow.

Just how many retailers have opened and closed just as quickly in this country?

Too many to contemplate, but certainly in the Appliance field there have been the Good Guys and Dick Smith in recent times and the list is likely to be added to through the potential demise of JB HI FI. One assumes that is they do depart NZ that they ensure the exit is tidy and customers are not left out of pocket.

There is always a great deal of fanfare when overseas retailers announce their arrival in this country. The most recent, is the applauded potential arrival of Chemist Warehouse who apparently will take our retail environment to another level!!  Really?  We are well served by Chemists in this country and another group arrival in my view is likely to be overkill.  I recall about 10 years ago that The Warehouse had a group called “Care Chemists”. Ultimately the delivery of these stores became just too hard for the Warehouse Group and they closed all the outlets. Similarly, there was great fanfare about Countdown supermarkets having a similar in- store facility. Whilst this has been trialled it would seem that the idea has floundered and few have been developed to a point that they are truly representative in all Countdown supermarkets. 

So why do these overseas companies tend to arrive with a fanfare and leave with few trumpets blaring?

I believe our infrastructure is simply too small to maintain a level of sales and profitability which provides long term viability and security for these companies. Groups of stores are hard to develop and maintain with a population nationally of just on 5 million people, a third of who are in one city.

We as consumers should also be mindful of the need to support our local retailers over those that have a tendency to be “retail carpetbaggers” who come and go with equal speed. I am often reminded that our local retailers support us in the various communities and supporting them over others can be rewarding for all of us. With the potential for Amazon to arrive in New Zealand, competition will continue to increase and with it the need for support of our traditional retailers.

Sharewatch | Micheal Hill International

Michael Hill International has delivered another bonza result for the year. This includes record revenue and EBIT for Australia (now the company’s home base), a truly fair dinkum achievement.

Here in New Zealand, where the company began, Michael Hill continues to excel. It made sales of $122 million, and generated EBIT of $28 million, a record. The New Zealand stores have consistently performed strongly for at least the last six years, a time during which many retailers have struggled.

Michael Hill continues to explore growth opportunities – its Canadian expansion is starting to bear fruit, with revenue now at CAD $113 million and record EBIT of CAD $12.6 million. Admittedly, this is still not as profitable as the New Zealand or Australian operations, but the signs are encouraging.

The smaller US operation, though, continues to disappoint. It has lost money every year, and in 2017 it made a loss of USD $3.8 million on revenue of $12.5 million. This is minor compared to the overall size of the company, but US success seems to be a long way off.

Emma & Roe is a new retail brand for the company, still in its growth stages, and now has 29 stores open with revenue of $15.1 million. Profit remains elusive – with an EBIT loss of $6.9 million – but this is a promising brand, and Michael Hill will take the opportunity to tweak the format as they continue to open stores going forward.

Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils. This post originally appeared on RCG’s blog.

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