Although sales and net profit are down, Clive Peeters managing director Greg Smith is confident that the retailer will return to profitability. He said this will take some time, but it has well and truly started the journey.
According to the release issued to the Australian Securities Exchange, Clive Peeters Limited achieved a net operating profit after tax of $0.4 million for the year ending 31 December 2009, this is 60 per cent below the result for the corresponding period last year. EBIT and EBITDA for the half year were $2.0 million and $4.6 million respectively.
In addition, overall sales for the period fell by 5.3 per cent, comparable store sales for the group declined 6.5 per cent and gross profit margin declined 22.6 per cent.
“We provided an earlier business update on 11 February 2010, stating that we considered the half year result to be very creditable, having regard to the misappropriation events and the material impact that these had on trading over the months of July 2009 to October 2009,” said Smith.
“Some erosion of gross margin occurred during H1 2010 due to a more competitive retail environment. However Clive Peeters margins were impacted negatively as a result of the misappropriation events and the associated impact this had on our supply channel and rebate revenue.”
According to Smith, the company’s balance sheet has been strengthened by the return of cash from the misappropriation recoveries. Smith said that because the recovery process is now complete, it will lodge its insurance claim for the misappropriation losses in the next few weeks.
Smith was still very wary of the immediate trading conditions, due to the fact that margins are still under pressure and there is a strong chance that interest rates may continue to rise in the future.
“Lifting our margins will be a high priority in H2 2010 as we recognise this is a key plank of our return to profitability,” he said.
“It will take time to return to our historical margin achievements, but we have commenced that journey.”
“Our margin has been a fundamental strength of our business model, and we will refocus on what have been the successful drivers of margin and on the product categories that we are renowned for.”