Freedom Furniture saw a slight increase in sales last year, but its net loss blew out to $9 million. Photo / NZME
Freedom Furniture saw a slight increase in sales last year, but its net loss blew out to $9 million. Photo / NZME
The furniture retailer is relying on its Aussie owner to pay its debts as increased costs, including transport charges affected by Red Sea terrorism, weigh down the company’s financial accounts.
Freedom Furniture has slumped to a $9.2 million loss in New Zealand while its Australian parent company has target="_blank">warned Red Sea terrorism activity is constraining supplies, causing shortages and ratcheting up freight costs.
The furniture and homeware retailer has 12 stores in New Zealand, including five in Auckland. Last year it closed two stores, one in Palmerston North and one in Taupō. Freedom’s financial results for the year to October 1, 2023 show revenue was stable at $64.8m, up from $62.1m in 2022.
However, expenses — in particular raw material costs and transportation expenses — climbed 14 per cent to $74m. The company recognised $4.1m of inventories as an expense item and recorded an impairment on property, plant and equipment totalling $1.58m.
The bottom-line loss of $9.2m compared with a $2.8m loss for the 2022 financial year.
Notes to the accounts highlighted a net deficiency in assets of $8.79m, and said the ability of the company to continue as a going concern was dependent on the continued financial support of Greenlit Brands, its Australian-based parent entity and subsidiary of global retailer Steinhoff International.
“To this extent, Greenlit Brands Pty Limited has provided a letter of financial support to the company whereby it has agreed to provide sufficient financial support to enable the company to pay its debts as and when they fall due,” a note under the “Going Concern” section of the accounts said.
Freedom paid Greenlit a management fee of $338,000, but no dividend was declared for the 2023 financial year.
Freedom’s loss-making New Zealand arm mirrors that of Greenlit across the Tasman. Latest accounts show Greenlit recorded revenue of A$1.08 billion for the year to October 1, up just 0.4 per cent on the previous year, and its net loss quadrupled to A$9m.
Greenlit’s Fantastic Furniture and Freedom retail banners operate 146 stores in Australia and New Zealand, making the group one of the country’s largest furniture retailers.
Like Freedom in New Zealand, the larger loss was attributed to higher raw-material input costs and increased supply-chain expenses.
The Australian newspaper reported Greenlit had also posted lower-than-expected sales through December and January, due to cost-of-living pressures on consumers and a tighter economy.
Yemen's Houthi rebels have been targeting ships in the Red Sea and Gulf of Aden, pushing up freight costs and constraining supplies. Photo / AP
The company was one of the first retailers to announce disruptions caused by industrial action by unions and terrorist attacks in the Red Sea.
“Compared to prior years, the business has not faced the same level of supply-chain disruption; however, [the DP World ports dispute has caused] delays and some shortages in stock availability,” a spokesman for Greenlit Brands told The Australian.
“Ocean freight rates are also seeing some increases due to the Red Sea conflict.”
Terrorist attacks in the Red Sea linked to the war in the Middle East have forced many shipping lines to seek alternate routes — sailing around the Cape of Good Hope in southern Africa — which add at least 10 days and more than 15 per cent to shipping costs.
The Red Sea security situation was increasing rates between New Zealand and Mediterranean markets, while strong pre-Chinese New Year demand had resulted in rises in freight rates between New Zealand and China.
