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Renaissance posts first-half loss on shrinking margins, impairment

Renaissance Corp, the retailer of Apple products and design school operator, turned to a first-half loss on disappointing sales, shrinking margins and an impairment charge at its Yoobee stores.

The net loss was $3.1 million in the six months ended March 31, from a profit of $1.96 million a year earlier. Sales fell to $24.7 million from $77 million a year earlier, which was before the company shrank its balance sheet with the sale of its IT business.

Year-earlier sales from continuing operations were $28 million.

Chairman Colin Giffney called the result "bitterly disappointing" and reflected overheads in retailing that are "too high by comparison with our Apple-only international peers".

Revenue from Apple products fell 26 percent in the first half as its gross margin shrank to 8 percent from 11 percent a year earlier. That partly reflected Apple's decision to reduce its own margin on the mini iPad when it was introduced.

"On top of that, many of our competitors use Apple product as a loss leader to attract customers to their store," Mr Giffney says. "It has been a tough environment."

The Yoobee stores continued to miss budgeted revenue during the first half, including its revised targets in December. It took a $2.99 million impairment to write off goodwill on its retail division.

Its Yoobee design school, previously known as Natcoll Design Technology, had a better performance with earnings before interest and tax of $853,000, which it said was a good performance given the high New Zealand dollar and slow international student market.

The shares last traded unchanged at 16 cents, giving the company a market value of $6.9 million, and have gained 14 percent in the past 12 months.


Comments and questions

What's the status of Grant Samuel's strategic review ?

Review done and directors have been running around in circles.

Can't have achieved much then?

Rick Webb should replace Colin Giffney as chairman.

Apple is no longer the golden goose for anyone other than Apple, so it's probably timely for retailers such as this to drop their sole, or large dependance on Apple, for profitability. iPad and iPhone are now just one among a large number of products in their respective markets and as others gain market share tougher competitiion means margins will tighten up. Especially now that Apple products are mostly no longer seen as the premium product.

This kind of result demands resignations from the board. But no, the current lot will steer Renaissance into receivership, probably within 18 months.

The loss does not surprise me.

First, you have parallel imports cutting into sales - second, it can cheaper to buy an iPad or iPhone in Australia or US and bring it to New Zealand.

However, in NZ many buy as part of a telco package and again New Zealanders are being ripped off. Most telco data plans in New Zealand are much higher than overseas. In Australia the plans are often cheaper and the iPad is a free bonus. For example, with a Vodafone Australia 2gb contract the 64gb iPad3 is $0 on a $54pm/24mth contract, while same 2gb data deal in NZ is $299 for iPad on $80pm/24mth contract. Cost of ownership is $1350 in Australia and $2219 in NZ!

Then, apart from the technology cost, we add in competing products and poor customer support in New Zealand and I have to wonder why I stay so Apple loyal. My house has 1 x iMac, 2 x Powerbook, 2 x iPhone and 3 x iPad. Most annoying for me was recently taking my daughter's brand-new iPad 3 in for a repair and having it replaced with a 2nd hand refurbished iPad that had obviously been used, going by the marks on it.

Re your daughter's iPad - that doesn't sound right at all. I think you should take it back and suggest they engage more wholeheartedly with the Consumer Guarantees Act.

2 months of debate so far but no action!

Diversifying into other consumer price groups using some cheaper alternatives seems the way to go, when you think how small the NZ market is, and they are targeting only the top price bracket. Factor in a deep recession in NZ and the money isnt there for a lot of consumers to buy Apple when there are cheaper alternatives.

Long time Apple user here. Apple hardware quality has been dropping the past few years; I have sent back two 2012 iMacs with bad screens this year...