Postie Plus forecasts improving conditions

Postie Plus boss Paul Young is crossing his fingers for bad weather.

After a much-delayed summer forced two warnings from the clothing retailer, it was finally able to bring some good news to market yesterday, reporting first-half sales of $55.2 million - about a million dollars ahead of a forecast it made in January.

The change was not enough to budge the company from a predicted loss of $700,000 for the period, however. It had to sell at a heavy discount summer stock which did not move in the cold pre-Christmas weather.

But with good weather after Christmas, culminating in a warm February, the pressure on stock rooms overflowing with cool clothing has eased. Young is hopeful autumn will now come on cue.

"We should start to see lower temperatures in April and May" in a normal year, he said.

Postie Plus reported second quarter sales of $31.7 million, down half a per cent from $31.9 million in the three months to January 2004.

Despite the quarterly decline, actual half year sales were still ahead of the forecast of $54 million for the period, and were up from $52.3 million in the previous corresponding period.

Young said that although the turnaround was slight since the company released forecasts for the period on January 17, the continued warm weather meant stock inventories were back near to normal.

"The last six or seven weeks has been pretty good. If it continues for another three or four weeks we'll be getting back to where we should be at the end of summer," he said.

The second half, which began in February, had started in line with the same season the previous year, rather than as a continuation of the troubled six months to January.

"Summer did happen in February and that has allowed us to sell through summer clothing we thought we might not have moved, albeit at a discount."

It had previously looked as though the company could have been left with about 10 per cent more summer stock on its hands than normal at the end of the season - stock worth a couple of million dollars.

Young said summer clothes were being sold for discounts of 30 per cent to 50 per cent at the end of the season, but taking out the effect of normal progressive discounting the slow start to summer would mean Postie Plus had ended up selling clothes about 15 per cent below what it normally achieved.

While he doubted the company would see another repeat of the "one-in-one-hundred year" December, it had learned some lessons and changes would occur as a result.

"There has been a lot of soul-searching," said Young.

"We are investing quite a bit in improving the merchandise and stock control area.

"We will make our initial orders a little lower and repeat orders, and we'll be quicker to discount."

Other retailers had moved more quickly when they saw clothes fail to shift, but Young "kept on thinking we would have a summer".

Young said Postie Plus would not go down the route followed by The Warehouse, which has put pressure on some suppliers to provide discounts.

"I think that's a poor strategy, with lots of dangers to it," Young said.

Limited numbers of local suppliers facing increased labour costs could be tipped over the edge by such a strategy, while Chinese suppliers could easily swap production to the United States, and if they did agree to discount, could reduce quality.

"We're quite happy with our supply lines."

Full circle

* In December, Postie Plus warned that profits would be below the previous year's after poor weather hit summer sales.
* In January, the clothing retailer said it was expecting a $700,000 loss because poor market and weather conditions had affected crucial Christmas and Boxing Day sales.
* Yesterday, it reported first-half sales had come in slightly ahead of its depressed forecast.
* If good weather continues for three or four weeks, the company might be able to get stock levels back to normal.