Clive Peeters MD outlines the positives, despite the 90% profit drop

By Patrick Avenell

Clive Peeters managing director Greg Smith has provided some upbeat news to accompany last week’s announcement that the retail group’s net profit had dropped by almost 90 per cent. Although Smith concedes that these are the worst conditions he has experienced in 30 years, there is optimism in the company’s strategies to survive the downturn.

In Sydney, which has been previously been the epicentre for disappointing results, Smith said that improvements in this area were now evident.

“We are pleased that there is continued improvement coming through in that State despite the very depressed New South Wales retail Conditions,” he said.

“We were pleased that despite lower purchases in line with the inventory reduction programme which caused a loss of $4m of rebates over the half we were able to convert a Q1 2009 Operating Loss into an operating profit before tax for Q2 2009 of $3.2 million.”

Although Smith confirmed that there are no new stores set to open in calendar 2009, he did report that the two new trial stores, which explore new product ranges and revenue opportunities, had so far been successful.

“…On a positive note our pilots for kitchen and bathroom renovations (Moorabbin and Thomastown) and for a range of new technology, software and gaming product (Moorabbin) [sic] have both been launched in recent months and are showing promising early results.”

As with key competitor Harvey Norman, Smith lamented the extreme pressure that is now being placed on margins in this industry.

“With sales under significant pressure this caused increased competition and a sharp fall in gross margins over H1 2009 – the Company’s first margin decline in over 15 years, which says a lot about how challenging this retail environment is.”

Clive Peeters’ share price has been steady recently, hovering at, or just under, the 10 cent mark.

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