New Zealand apparel retailer Postie Plus Group Limited (PPLG) is facing an executive dilemma, following a frank disclosure on the status of its business.
The group, which recently confirmed a significant net loss for 2013, has lost Hamish Stevens as a director at PPGL, after just two months in the role.
As previously reported on ragtrader.com.au, Stevens replaced former PPGL director Paul Smart in August 2013, after Smart resigned from his position at the company. At the time, Smart had cited his increasing workload on other boards as the reason for departure.
Stevens has not yet cited any reason for his swift departure, and no replacement has been announced by the PPGL board to date.
The executive departure also follows a grim business overview released by the company as part of its full year results presentation, which confirmed a large loss for the fiscal year 2013.
According to the figures, PPGL sales revenue was $84.24 million, a decrease of 10.5 per cent on the prior year’s result of $94.08 million. The traditionally stronger second half incurred sales of $40.95 million, compared with the reported revenue of $43.29 million in the first half.
The results highlighted the impact of “distribution difficulties”, which PPGL chairman Richard Punter cited as a core factor for the lacklustre outcome.
He said the group’s sales and margins were heavily impacted during the year by extreme difficulties at PPGL’s third party distribution centre. In addition, he noted the consequential effects of stock availability and later discounted stock clearance and, to a lesser extent, the warm winter.
“The unexpected disruption to distribution which began in the first half of the trading year was not resolved until well into the second half, deeply impacting our stock levels in store, subsequent sales revenue and gross margin” Punter said.
“The 2013 year was planned to be a year of reorganisation with a major profit improvement project, new headquarters, fresh team and new third party operated distribution centre.”
“However, the distribution change completely knocked us off course. The move did not run according to plan and over Christmas and New Year the true scale of the problem emerged. Acute bottlenecking in the supply chain continued to deteriorate with serious displacement of stock and erosion of the group’s sales capacity.”
PPGL revealed it has prepared an assessment of the losses it has incurred as a result of the problems with its third party distribution centre. The company proposes to take steps to obtain redress for those losses from the third party provider.
As a result of these issues the company is taking steps to improve its working capital position. On August 6, 2013 PPGL advised that it would be exploring options to raise capital for the purpose of alleviating the working capital position and reducing debt. Advisers have subsequently been appointed.
PPGL’s bankers have reportedly provided additional support and continue to reserve their rights in relation to outstanding covenant breaches. In addition, the company is working with our suppliers to extend trading terms.
“Over the next few months the company is working through a tight cash flow position with the support of its bank and creditors,” Punter said.
“Our distribution has been stabilised. The profit improvement programme is under way and has delivered improvements. The team is busy locking in changes to improve medium term gross margin. We are still recovering from the damage to market share suffered in the second half of the year.
"The restructure carried out during the move to Auckland is well progressed. The new teams are passionate about the brand and looking forward to driving the business unhindered by the previous difficulties.
“We have further improved the efficiencies of our retail operations. Operationally, our nationwide store chain is well placed to benefit from the returning levels of consumer confidence, particularly with a strong presence in Auckland and also in Christchurch, with employment growth in both our major cities now evident and important to household spending in the 2014 year.”
“We have strengthened our senior management team with the appointment of Richard Binns as chief executive officer, an experienced retail sector executive, who commenced with PPGL this month.”
Postie Plus Group Ltd (PPGL) is a New Zealand owned retail business with over 100 years of history. PPGL incorporates fashion brand Postie (apparel, beauty and accessories) and Schooltex (school uniforms). The group currently operates over 80 stores and employ approximately 650 staff nationwide.