Postie Plus breaches banking covenant, appoints new manager

BUSINESSDESK: Clothing retailer Postie Plus Group said it has breached one of its banking covenants relating to earnings for the rolling 12 months ended April.

The company said it hasn't met its interest-to-EBIT (earnings before interest and tax) ratio covenant of 1.5 times, although it has met its proprietorship and liquidity covenants with its banker, Bank of New Zealand.

“The BNZ notes the breach and, following a review of the company's action plan, has reserved its rights pending expected return to covenant compliance on or before July 31,” Postie Plus said.

The announcement comes a week after the clothing retailer announced a 5% drop in third quarter sales on the same day shareholders approved the $4.1 million sale of its Babycity chain of stores.

Postie Plus has also beefed up its management team, appointing Jane Gammon as the Postie Plus chain's general manager, and will relocate its merchandising and marketing functions to Auckland from Christchurch in “a progressive move northwards to be located closer to customers and growth markets”.

The latter were moved to Christchurch from Westport in early 2008 after what was then described as “a thorough investigation into the most suitable location”.

The finance, IT, logistics and human relations functions will remain in Christchurch until 2014.

Ms Gammon, who was international business manager at Pumpkin Patch and has previously worked for The Warehouse and Debenhams in Britain, will take up the position in early June.

She replaces David Primus, who has been appointed to a new role of strategy general manager focusing on acquisition and e-commerce strategies as well as a range of business development projects, the company said.

“We have talked a lot about our strategy to become a modern, exciting retailer for all the family with a nationwide network of stores and an appealing online shopping presence,” chief executive Ron Boskell said.

“We want to double in size and, while some growth will be organic, we are venturing into expanding our range and reach through the acquisition of compatible brands and, with that in mind, we will progressively shift our base from Christchurch to Auckland where our greatest opportunities lie.” 

Postie Plus hasn't had much luck with brands other than its flagship chain.

Mr Boskell is on record as saying Babycity didn't make money and in 2008 it sold its Arbuckles homewares chain to Kathmandu founder Jan Cameron, who owns 19.9% of Postie Plus.

In the couple of years after its float phased out a couple of other women's wear brands, Rendells and Gardner Fashions.

When the Babycity sale was announced, Mr Boskell admitted the poor track record but said: “We've got the experience of what not to do, which is helpful.”

Postie Plus shares are unchanged at 21 cents, valuing the company at $8.4m compared to its $40m value at the 2003 float.

The shares have fallen from their year high at 32 cents in January.