Shares in small Melbourne-based consumer entertainment and whitegoods retailer, Clive Peeters, took another pounding yesterday as investors continued to fret about its botched move into Sydney.
The shares slumped 40c to $2.10, after plunging 20 per cent, or 64c on Tuesday after issuing an unexpectedly gloomy profit update.
That took the loss to around a third of the Friday close last week of $3.14.
Basically earnings will be flat was the message from the update. The reason was given as the slower than forecast returns from the company's push into the most competitive market in Australia, Sydney.
Sydney is the home market of industry leader, Harvey Norman, which has a heavy concentration of Harvey Norman, Domayne and Joyce Mayne stores in the Sydney region.
As well smaller groups like the franchised Good Guys from the US and the more CE based JB Hi-Fi, are also well-entrenched.
JB Hi-Fi is doing very well, riding the CE and IT wave: it revealed a sharp rise in sales and upgraded earnings growth to as much as 51 per cent for the year to June 30.
Against this background, and the generally solid retailing conditions (except for Coles Group and some women's fashion chains), the problems Clive Peeters is encountering in Sydney appear a little odd.
Certainly it seems to be doing well everywhere but Sydney.
The company told the market that "its earnings outlook for the Full Year 2007 will be flat, with its Net Profit After Tax for the year ending 30 June 2007 expected to be in the range of $12.1 million to $13.1 million.
Greg Smith, Managing Director, said "Our business is performing well in all States except NSW, with Victoria, Queensland, Western Australia and Tasmania all trading at or above our expectations.
"With our entry into NSW, our brand is taking longer to gain traction than we had hoped for and expected.
"However there are good grounds for optimism, as floor traffic into Sydney stores is on the increase, and our staff are gaining more experience by the day.
"This will translate to improved sales performance going forward. Historically, our new stores typically continue to mature at the rate of about 10% per annum for up to five years after we open them, so we have growth in existing stores to look forward to, plus the impact of new stores in the years ahead."
He said the company had opened its first NSW Seconds Store in the western Sydney suburb of Auburn just two weeks ago, and its fifth Sydney superstore at Bella Vista will open in August 2007.
"This will give us improved leveraging of advertising and warehousing costs into FY 2008 and beyond," Mr Smith said.
"We always knew that the NSW market would be a difficult one to enter, but the Clive Peeters' strategy is a sound one. For our aspiration to become a major national retailer to be realised, we had to enter the NSW market at some stage.
"We are confident that the hardest year is behind us and that the benefits will be clearly seen in the years ahead.
He said that to increase the focus on NSW stores the company is sending "one of our highly regarded Clive Peeters' Store Managers from Victoria to take up the new position of NSW State Sales Manager, and another experienced Manager from Melbourne to head up the new Bella Vista store.
"This will significantly strengthen the Store Manager experience, reinforce our culture, and add to our training resources in NSW. Both appointments will take effect in July 2007".
Mr Smith said the company will look to provide further guidance on NSW trading at the time of release of its final result for FY 2007.
