$30m boost for Farmers

By IRENE CHAPPLE

Farmers department stores are to get an immediate $30 million cash boost from new owner James Pascoe.

Total investment to rejuvenate the chain could reach $100 million.

James Pascoe's managing director, David Norman, said it would not seek dividends from Farmers.

And earnings from other businesses in the James Pascoe group would be used if necessary to ensure the success of Farmers.

Norman said the "intention was to commit considerably larger sums [to Farmers] than that already planned."

Asked if former owner Foodland Associated's commitment of about $50 million over the next four or five years would continue, Norman said: "From what our due diligence indicated, more like double the amount mentioned."

Such investment plans would almost double the outlay the James Pascoe group made when it bought Farmers' retail business for $122.3 million.

The total price paid by a partnership between James Pascoe and Fisher & Paykel was $311 million.

The deal gave Fisher & Paykel the lucrative Farmers financing business for $188.7 million.

It doubled Fisher & Paykel Finance's customer accounts to around 600,000 and included a 20-year deal with James Pascoe to supply finance to Farmers' customers.

Norman described the sales process, which began in March and briefly collapsed in September because of a price stand-off, as "extremely harrowing".

The James Pascoe group - owner of 28 Pascoes and 12 Stewart Dawsons stores in New Zealand and 123 Prouds stores in Australia - is a major jewellery retailer, and market commentator Brian Gaynor has questioned its entry into the declining department store market.

Last month, Foodland Associated, a Perth-based listed company, reported Farmers had increased its annual sales from A$606 million ($702 million) to A$644 million ($746 million).

But its earnings before interest, tax and amortisation dropped from A$43 million ($49.8 million) to A$37.6 million ($43.6 million).

While Farmers does not split its profit between the retail and financial businesses, Fisher & Paykel has indicated its ownership of the finance company will bring in further annual earnings before interest, tax and write-offs of between $24 million and $28 million.

That suggests a large chunk of Farmers' profit came through the finance business.

Current management, led by chief executive Nick Lowe, is creating a "store-within-the-store" environment, in part to attract younger customers. One of the new concepts was Prouds kiosks, announced in August.

Norman said the price paid for Farmers retail was "full for the current performance, but the opportunity exists to improve the bottom line ... In relatively short order the price paid will look very much better".

Gaynor said department stores were struggling because of competition from discount retailers and speciality stores.

Norman said Gaynor's comments were too general and underestimated the effect one or two people could have on an organisation.

This was particularly so "if they are prepared to invest money as well as time".

Norman owns the James Pascoes group with his wife, Anne, and the business has a solid record under their management.

James Pascoe established the business in Auckland almost 100 years ago.

The company has stayed in the family - Anne Norman is James Pascoe's granddaughter.

James Pascoe bought Prouds from statutory administrators in 1996 when the company was on its knees, losing A$11 million a year.

Within three years Prouds was returned to profit, and now James Pascoe's Australian businesses are understood to produce earnings before interest and tax of between A$20 million and A$30 million.

Last year, Prouds opened its 100th store in Australia.

The announcement was made in a shy press release which said the company was private and avoided publicity, but felt the landmark was worthy of comment.

But Norman said the company was "highly unlikely" to take Farmers to Australia.

Its plans now were to "give the stores more of the product that people want to buy at prices they are happy paying, in an environment that is pleasing ... and with high levels of service."

James Pascoe

Jewellery retailer

* Owned by David and Anne Norman, James Pascoe's grand-daughter.

* Established in Auckland early last century, entered the Australian market through the purchase of Prouds, in 1996. Staff of about 2,800, most based in Australia. Owns 28 Pascoes and 12 Stewart Dawsons stores in New Zealand, 123 Prouds stores in Australia.

* Group turnover including Farmers will top $1 billion.

Farmers

Department store chain. 76 stores in NZ.

* Established 1909. Sold last week by Australia-based Foodland Associated James Pascoe and Fisher & Paykel for $311 million. The retail arm valued at $122.3 million.

* Staff of about 3,680.

* Full year sales of A$606 million. Earnings before interest, tax and amortisation of A$37.6 million.