Renaissance fires shot at Apple over margins

Specialist Apple retailer Renaissance says the giant gadget supplier has "a serious problem" because of its low margins.

Listed company Renaissance Corporation, which owns the Yoobee chain of tech retail stores, is on the cusp of making "big decisions" for its retailing arm in the coming weeks, chairman Colin Giffney says.

Mr Giffney told NBR ONLINE Yoobee's business model of retailing Apple as a sole product "is broken".

He says the margins for Apple products are slight – just 7% for an iPad mini and 8% for an iPad – and there is only so much cost-cutting the company can do to make it affordable.

"If you look at the big picture I think Apple have got a serious problem.

"They won't take any notice of me saying that from New Zealand but they're going to have to watch it.

"A lot of the retailing that's done here is loss-leaders. I've told you the margins, so someone announces they're doing 10% off – you work out for yourself what's left.

"The Warehouse use it as a method to get people in the store, because they know if people come into the store they might buy a pair of socks or something like that, and they'll make more on the pair of socks than they will on the computer.

"It's just about getting the margin one way or the other."

Renaissance lost its exclusive Apple distribution deal in 2006 and sold its IT distribution business to Exeed, a transaction that included legal threats.

Renaissance shares (NZX: RNS) were up 5% by early afternoon to 21 cents and have gained 91% in the last year.

Board pressure

Poor results are pouring pressure on Renaissance's board – as well as its own goal of turning up to the annual meeting without details of its much-vaunted strategic review, other than saying a "path is "more or less determined".

Mr Giffney said afterwards the board expected "a bit of a donnybrook", adding: "And to be honest if I was a shareholder I would be p*ssed, too."

So what are the options? Closing its Yoobee stores, selling them off or changing the dynamic by stocking other brands?

All of those, Mr Giffney says, as well as reducing the number of stores. There didn't appear to be investor appetite for further investment, he says.

"We clearly can't sustain losses in retail; we won't." 

At the start of the meeting – on the fourth floor of the Yoobee School of Design in Grafton – it was clear the board was steeling itself for a fight.

As directors sipped Otakiri sparkling water, Mr Giffney shareholders were asked to vote on whether it was appropriate for three media representatives, including NBR ONLINE, to be present.

But the barrage never came, despite a trading update which made it clear the company will miss its $1.47 million EBIT profit guidance.

Maybe investors are saving their anger for when the strategic plan is fully revealed.

dwilliams@nbr.co.nz