The Business Herald’s markets and banking reporter.

Dick Smith demise boosts Noel Leeming

Noel Leeming's operating profit jumped 87.6 per cent to $12.1 million in the last financial year.
Noel Leeming's operating profit jumped 87.6 per cent to $12.1 million in the last financial year.

The collapse of technology retailer Dick Smith has provided a shot in the arm to local electronics chain Noel Leeming.

Its financial performance was reported on Friday as part of the annual result of its parent company, The Warehouse Group.

Noel Leeming's full-year operating profit rose 87.6 per cent to $12.1 million from $6.4m a year earlier.

Annual revenue at the 75-store chain, which The Warehouse Group acquired for $65m in 2012, rose 13 per cent to $752.1m.

Same store sales jumped 16.7 per cent in fourth quarter of the financial year.

"The exit of Dick Smith has accelerated the already strong momentum in gaining market share [by Noel Leeming]," The Warehouse said on Friday.

"Significant growth in sales overall for the year reflects Noel Leeming's leadership position in key growth categories such as cellular."

Dick Smith collapsed into receivership in January amid a sales slump that left it with a mountain of excess stock that had to be heavily discounted in the lead-up to Christmas.

It has now closed the more than 390 stores it operated on both sides of the Tasman, although the brand continues to operate online under a new owner that purchased the rights to it in March.

Dick Smith went into receivership owing A$390m ($410m) to creditors and more than 2800 staff were affected by the chain's closure.

Analysts at Morningstar said the Dick Smith collapse had boosted Noel Leeming's business in the same way it had benefited Australasian retailers Harvey Norman and JB Hi-Fi.

"The [Noel Leeming] unit now represents 11 per cent of retail operating profits, putting it just behind Warehouse Stationery in importance for the group," Morningstar said.

"However, consumer electronics remains a highly competitive market in New Zealand and we estimate operating margins at Noel Leeming to remain relatively tight at around the 1.6 per cent achieved in fiscal 2016."

The Warehouse Group reported a 12.3 per cent lift in full-year adjusted profit to $64.1m, narrowly beating guidance.

Revenue rose 5.6 per cent to $2.9 billion as sales lifted across all of its brands.

Morningstar said The Warehouse's core Red Sheds business would face a more competitive environment in the current financial year as international clothing retailers entered New Zealand.

"We anticipate competition in the apparel category to be particularly fierce, with Zara and H&M expected to increase their market share in New Zealand."

Shares in the Warehouse Group, which have gained 22 per cent in past year, recently traded at $2.92.

- NZ Herald

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