An after-tax loss for department store Kirkcaldie and Stains has been blamed on stagnant consumer confidence, a lack of an online shopping presence and a quadrupling of insurance premiums.
The Wellington-based group recorded a $773,000 loss to August 31, compared with a $56,000 loss the previous year.
Managing director John Milford says he expects another tough year ahead, but a “much improved” result.
He says the retail climate in Wellington continues to be challenging, with official figures showing the region is one of the lowest performing in the country.
Adding to the uncertainty is the increase in internet shopping. Kirkcaldie and Stains was lacking an internet shopping presence until last month.
The department store has started selling a limited number of cosmetics online, with the goal of having all lines on the site by May.
Mr Milford says the gross margin percentage decline of 1.6% was due mainly to last year’s $2 million overhaul of the store’s IT systems, which including new point of sales software, a new merchandise system and new customer relations system.
The company’s property division helped keep the total losses lower, reporting a pre-tax profit of $908,000 – an increase of 45% over the previous year.
The result has been put down to rental income from the new Country Road store and reinstatement of rental income in April from the redeveloped and earthquake strengthened space leased to Contact Energy.
The company says this result was achieved, despite an increase in annual insurance premiums from $235,000 three years ago to more than $1 million.
However, it expects on-going redevelopment work in its Harbour City Centre building to negatively impact on the property division this year, as two floors will have been vacant for eight months.
The refurbishment includes a long-term agreement with Contact Energy and a $6.5 million development of levels four and five of the building, along with common areas.
Company chairman Falcon Clouston, who is also a member of the New Zealand Markets Disciplinary Tribunal, expects this year to be another tough one for the retail sector.
However, he says two key changes – consolidating retail from two buildings into one and moving the corporate office out of Wellington cbd will help reduce fixed rental costs paid by the retail business to the property division.
Kirkcaldie and Stains decided against issuing a dividend to shareholders.