Farmers, Deka turns in poor result

By KARYN SCHERER

One of New Zealand's biggest retail groups has again produced a disappointing result for its Australian owner.

The Farmers Deka group, with 125 stores, revealed yesterday that poor sales of big-ticket items had helped drag down its performance for the year to the end of July.

While clothing sales increased by 7 per cent, big-ticket items such as furniture and appliances did not sell well, particularly in the second half.

Managing director Wayne Walden was not available for comment yesterday.

But in a statement, the group's parent, Perth-based wholesaler and retailer Foodland, blamed the poor sales on a fall in consumer confidence, sparked by interest rate increases and fuel price rises. It also noted that homeware sales, particularly furniture, were "unsatisfactory."

Foodland had warned last month that the result was likely to be below budget.

While it no longer provides results in New Zealand dollars, it did reveal last month that sales had remained flat during the year, after a particularly difficult second half.

While the group's actual sales rose by 1 per cent to $NZ811 million, they were flat on a comparable basis.

Since the sales figures were released, Farmers has revealed big expansion plans, striking a deal with shopping mall owner Westfield to take anchor tenancies in four of its mall projects in Newmarket, Albany, Pakuranga and Queensgate, in Lower Hutt. The projects are expected to eventually add an extra 35,000 sq m of retail space.

The company made little mention of the Deka chain, which has made losses in previous years, other than to note its merchandise range was being adjusted to improve margins.

But it confirmed that its overall profit from the group had fallen, with earnings before interest and tax falling by 14 per cent to $A34.8 million.

The group's credit business, Retail Financial Services, has also seen its credit book continue to shrink. The division, New Zealand's largest non-bank consumer finance organisation, has seen its book reduce by nearly $50 million in the past two years to $NZ304.9 million.

However, it also noted that it had got its bad debts under control, reducing from $10.5 million last year to $5.1 million this year.

Mr Walden is understood to be leaving the company when his contract runs out later this year.

His immediate boss, Foodland managing director Barry Alty, has also resigned, and Foodland announced yesterday that a British supermarket executive, Trevor Coates, will replace him.

Mr Coates has spent the past decade running the British arm of German supermarket chain Aldi.

Foodland's other New Zealand asset, supermarket operator Progressive Enterprises, continued to improve.

While supermarket sales were flat on a comparable basis, at just under $A1.5 billion, the closure of several of its wholesale stores helped boost earnings before interest and tax by 11 per cent to $A39.8 million.

The company also noted that its supermarket brands, Foodtown, Countdown and 3 Guys, had managed to improve their profit margin, from 2.4 per cent to 2.6 per cent.

The company is gradually getting out of the wholesale business, with just seven of its Rattrays outlets remaining at the end of July.

Despite the poor performance of Farmers Deka, Foodland managed a record profit after tax of $A75.5 million, excluding abnormal items.

Earnings before interest, tax and amortisation from continuing operations rose 4 per cent to $A148.8 million.