Kirkcaldie & Stain's [NZX: KRK], Wellington's up-market department store, says it will recapitalise the ailing retail business after the sale of its inner-city office tower before returning any surplus to shareholders.
The Wellington-based company plans to overhaul its retail offering to deal with rising inner-city rents and increasing competition from online rivals, and will use a portion of the funds raised from the sale of its Harbour City Centre on Wellington's Lambton Quay towards building a viable business, chairman Falcon Clouston told shareholders at last night's annual meeting.
"Before we have any discussion on a surplus distribution to shareholders we must first recapitalise the retail side," Clouston said. "Some shareholders may not want to take the risk of owning an omni-model retail business and we may need to re-organise the shareholding of the retail business."
As a result of the decision to sell the Harbour City Building, which was last valued at $50 million, fund manager Chris Swasbrook of Elevation Capital withdrew his nomination seeking a seat on the company's board.
In a letter read by Clouston at the start of the meeting, Swasbrook said he supported the decision to sell the building and to restore the retail business to profitability.
The $50 million valuation put most of the value in the front building, which counts Contact Energy as an anchor tenant, and included just the bare land value for the back building, which will need to be earthquake strengthened or demolished, Clouston said.
Managing director John Milford said the company won't sell the building cheaply: "It's a premium property and we will get the maximum dollars for it."
Among the initiatives to improve the retail business, Milford said the company plans to expand it online services, introduce a home brand shared with other New Zealand department stores, and is looking at setting up a furniture store on the city fringe.
"We can't make money out of 150,000 people in Wellington, we need 4.6 million people in New Zealand to make a living," Milford said.
Milford said online competitors were eating into local retailers due to the government's limit on charging GST on overseas goods, and that something would need to change to make up the shortfall in excise duty.
He also took a swipe at Wellington City Council for failing to support retailers after last year's earthquakes closed two car-parking buildings and didn't try to encourage consumers to come into the city during the Christmas period.
In response to a question form a shareholder, chairman Clouston said Kirkcaldie's won't resume dividend payments until the retail business returns to profitability, which might be in the next financial year.
The company's shares were unchanged to $2.40 yesterday, and have gained 26 percent this year.