Here’s a very different tale of two retailers.
Fashionwear group, Just, which is being swallowed by Solomon Lew’s Premier Investments, revealed an 11.2% downturn in earnings and warned that trading conditions remained soft.
But fashion retailer OrotonGroup lifted its annual profit by 70.1%, revealed a share buyback program and has plans to expand the number of stores in the coming year.
Two very different results and two very different assessments of Australian retailing.
And we will get a third take later today from department store group, David Jones, which has already foreshadowed a solid result.
Just (with around 880 stores in Australia and New Zealand), said net profit before one-offs fell to $54.6 million from $61.4 million, hurt by the slowdown in consumer spending. It had been expanding into South Africa and the US prior to the Premier buy.
Just directors said in a separate report that "Net profit after income tax for the year ended 26 July 2008 was $49.1 million (2007: $63.9 million), which reflects a 23.1% decrease compared to last year.
“The 2008 result includes the costs associated with defending the takeover by Premier Investments Limited, which amounted to $5.4m (net of tax).
"In addition, the 2007 year includes a gain on the sale of the company’s strategic investment in Colorado Limited amounting to $2.5m (net of tax).
“After adjusting for these non-recurring transactions and events, net profit after income tax for the 2008 financial year was $54.6m (adjusted 2007 $61.4m), which reflects a 11.2% decrease compared to last year."
Premier said the Just result was a "Credible result given the severe downturn in Australia during the second half, very tough economy in New Zealand, continued investment in South Africa and the USA, and a significant year-end adjustment to account for the foreign exchange hedge book.
"Sales of $861.1 million, up 7.0% over the year."
Premier said in the announcement yesterday that it expects a difficult retail environment for at least fiscal 2009 in both Australia and New Zealand.
It said that trading in the first eight weeks of the new financial year was soft, but it did not give figures.
Sales in the second half to July 2008 grew by 3.6%, well down on the increase of 10.3% posted in the first half. Just said net profit in the second half slid 44.1% with sales lower in Just Jeans, Jay Jays and Portmans, but up at the teenage chain Dotti.
Premier said a strategic review of all of Just’s businesses was continuing, and it would give an update in late November at the annual shareholders meeting.
The market didn’t like the news from Premier and the shares dropped 5.4% to $4.55 yesterday.
At OrotonGroup, it was a different story.
The shares rose 11c to $3.50 at one stage and closed up a cent at $3.40 as the market weakened in late trading.
Oroton reported a net profit of $16.74 million for the year ended July 26, up from $9.84 million the previous year.
Oroton chief executive Sally Macdonald said the fiscal 2008 results were "pleasing".
The company had warned of the improvement in August when it told the ASX:
"OrotonGroup presently expects Net Profit after Taxation (NPAT) for the year ending 26 July 2008 to significantly exceed the results for the corresponding 2007 period.
“It is anticipated that NPAT for the year ended 26 July 2008 will be in the range of $15.5m to $17.5m. This compares favourably to NPAT of $9.8m for the 2007 financial year."
"Overall revenue in the continuing operations of Polo and Oroton increased 11.2% to $122.6 million.
"Like for like store sales performance for the 12 months was 20% for Oroton and 17% for Polo Ralph Lauren versus 5% and 9% last year respectively. Sales productivity improved in FY08 as the group closed marginal stores and consolidated the factory channel in the prior year.
"The company has declared a final ordinary fully franked dividend of 13.0 cents per share, (up 30.0% on 10.0 cents per share in FY07) which takes the total full year dividend to 28.0 cents per share (up 75% on FY07 total of 16.0 cents per share). A special fully franked dividend of 7.0 cents per share will also be paid (FY07: 7.0 cents per share).
"As part of the company’s ongoing capital management program the directors have determined to commence a new on-market share buy back program commencing at the expiry of the current program which was announced in September 2007."
Ms Macdonald said the financial results show the success of "our recent turnaround strategy and the strength of our overall business model which we believe is well positioned for a variety of market conditions.
"Our cost reduction program which we announced last year drove total expenses down to 51.8% in FY08 versus 56.5% of sales in FY07. EBIT for the year was $24.3 M or 20.1% of sales (FY07 EBIT $14.3 M1 or 13.1% of sales), and EBITDA was $28.8 M or 23.8% of sales (FY07 EBITDA $20.3 M of 18.7% of sales). The group had a positive net cash position of $0.2 M at period end (FY07 net cash was $5.8 M)."
The retailer says it’s looking for 2009 to be a year of good store growth with the proposed opening of 8 new Oroton stores – in CBD, suburban mall and neighbourhood strip shopping sites – as well as at least 3 new Polo stores and some expansions of existing Polo sites.
On top of store growth it said it would be investing at a higher rate than usual in FY09 in store refurbishment works in both brands.
