Smiths City is preparing to close its unprofitable stores, as rough trading conditions and a rise of online shopping is being blamed for a decline in brick and mortar sales.
Smiths City seemed to be performing well; buying Furniture City in 2016 then rolling them out as a winder Smiths City brand end of last year. Yet the rebranded stores are struggling to gain traction, meaning the company has been operating at a loss.
The acquisition and rebranding of Furniture City came following the December 2015 changes regarding LV Martin, when Smiths City began consolidating its stores to turn its two Wellington-based LV Martin stores into Smiths City branches. It had owned the stores under the LV Martin brand for more than 10 years.
The Christchurch-based company expects to report a net loss of between $7 million and $8 million in the year ending April 30, compared to a profit of $2.4 million a year earlier, it said in a statement.
Revenue is seen falling to between $209 million and $213 million from $227.4 million a year earlier.
While the bulk of the company's revenue is through its retail network, the majority of its margin is in its finance arm. The company currently has 33 stores across New Zealand.
The retailer today said rebranding those stores and closing the Ngauranga Gorge outlet in Wellington "weighed heavily" on annual earnings, and that the former Furniture City outlets weren't meeting expectations.
"Although we are making strong sales of appliances – a category previously not available in the former Furniture City stores – furniture sales are yet to recover to levels prior to the rebrand," CEO Roy Campbell said. "This reflects a regional customer base that is still familiarising itself with the Smiths City brand as well as the broader market challenges."
The retailer celebrates its centenary this year.