Managing Director''s to the Annual Meeting of Kirkcaldie & Stains Limited
12 February 2013
Good evening Ladies and Gentlemen
Our Annual Report for the financial year ending 31 August 2012 reported an
after tax loss for the group of $773,000, compared to last year''s loss of
Despite the disappointing results the group''s balance sheet remains robust
with shareholder funds of $19,022,000 which represents an equity ratio of
41%. I highlight that in the accounts the carrying amount of the Harbour City
Centre ("HCC") is $26.8m, but the valuation of August 2012 values the Harbour
City Centre at $46,550,000.
The group net cash flows increased during the year by $2,450,000 and the
group held cash and cash equivalents of $5,127,000 at year end.
The retail operations reported a pre-tax loss of $1,760,000 which compares to
a loss of $643,000 in the prior year. Sales revenue for the year fell from
$35,106,000 to $34,205,000, a decrease of 2.6%. The gross margin percentage
decreased by 1.6%.
The sales revenue decrease of 2.6% was driven by a disappointing second half
of the year. The retail climate in Wellington continues to be challenging.
This has been supported by Government statistics showing the Wellington
region as one of the lowest performing regions in the country. The gross
margin percentage decline of 1.6% was in part due to competitive pressures
but it was mainly linked to the implementation of our new merchandise system.
A requirement of the new system is that we work using actual cost;
previously we had worked using estimated cost. The implementation required a
one-off adjustment to real cost.
I am pleased to report that other expenses were very well controlled with
only a 0.8% increase above the previous year in spite of higher amortisation
charges, higher insurance premiums and one-off costs associated with the new
The property operations reported a pre-tax profit of $908,000 compared to a
pre-tax profit of $626,000 in the prior year.
The pre-tax profit contribution from the property company increased after
completion of the earthquake strengthening works and partially offset the
loss made by the retail operations. The property vacancy rate also improved
from 13.9% to 9.6% at the end of August 2012.
The valuation of the HCC building was the same as the prior year even after
the $6,000,000 earthquake strengthening and retail development work. No
increase in valuation was a direct reflection of increased insurance
The 2013 Financial Year
The business up-date for this new financial year is as follows.
The retail business has continued to face revenue challenges with no
perceived change in retail confidence in the Wellington region. We have
increased our marketing spend and trialled a number of new initiatives to
drive revenue and increase value for our customers:
o A six month trial on six cosmetic houses of a customer loyalty/reward
programme that has allowed us to achieve sales revenue increase and sign-up
o We opened the Christmas Shop seven days early to correspond with the
opening of the World of Wearable Art Show. This allowed a number of "out of
town shoppers" to shop with us.
o Additional in-store promotions particularly for the month of December
focussed around shopping days, rewarding customers with gift voucher rewards.
o We opened for the first time on Boxing Day and enjoyed a very buoyant
o We have taken on board feedback from our customers around the Sale and have
taken a much more aggressive pricing approach to season clearance fashion.
o We have refurbished and re-laid Ladies Fashion, Childrensworld, Men''s Shoes
and Men''s Gifts.
o We have made the decision to consolidate our entire retail offer into the
main store. This decision is to ensure that we maximise the return from the
main building and gives us the opportunity to rent the retail space in the
HCC building to a third party. Luggage and Untouched World have been moved.
As we speak we are working on the new Cuisine store (Confectionery, Food and
Wine) on the Ground floor of the main store. Kitchenware products will move
to the 2nd floor with a newly re-furbished Fine China and Glass area and a
smaller but credible Cards/Stationery and Gifts area.
o The implementation of our merchandise system platform has allowed us to
achieve a number of back office savings while enhancing customer experience.
We are now able to take account payments at every point of sale in the store.
We will close the Accounts Desk on the 2nd floor and replace it with a
Personal Shopper/Bridal/Customer information area.
o We launched our new on-line store on January 16th. We have launched with
Cosmetics - a limited number of brands; our goal is to have all our Cosmetics
products on line by the end of May 2013. It makes sense to start with this
category as cosmetics are a very high percentage of our store sales and we
have a number of exclusive brands.
o We are constantly looking for new and exclusive products. We are in
negotiation to bring two new Australian fashion brands exclusive to us in
Wellington and, even more exciting, an exclusive young fashion brand from the
o Our buying team has benefitted from the appointment of a new female Buying
Manager and two new female Buyers.
o We were delighted to receive the inaugural Roy Morgan Department Store of
the Year Award for 2011. In 2012 we will either draw with Ballantynes or win
for a second year - a great achievement by the whole team.
o We continue to focus on the four key elements - service, selection, value
On the property front we reached agreement with our main tenant to take
additional space on levels 4 and 5 of the HCC. This necessitated us
completely stripping out both floors, constructing an atrium, linking Levels
1 to 5 and completely re-furbishing the common areas of the front building in
the Harbour City Centre. The tenant has signed a 9 year lease with further
rights of renewal and has committed a multi-million dollar investment in
their new areas. It is particularly pleasing and adds considerable value to
the building and also ensures that several hundred jobs stay in Wellington.
The works will cost approximately $6.5 million and it is funded, up to $6
million, by bank borrowing.
We have made the decision to move our administration, stock marking and stock
storage facilities out of the Harbour City Centre and locate them out of
Wellington CBD. This will give us custom built facilities, as well as
considerable savings. It is envisaged that this will happen within the next
We are forecasting a significant improvement in the performance of the retail
operations. There will be a decrease in profits from the property company
due to the major refurbishment works being undertaken. This is scheduled to
be completed on May 1st 2013. The agreements and work carried out on the
property will lock in profit and value for a number of years to come.
2013 is a very significant year for Kirkcaldies in that Kirkcaldie & Stains
Limited will have traded for 150 years in Wellington. It is a testament to
its founders and all the team members who have worked for the business in the
last 150 years. We still work to the vision and values that were created in
the store. We will be celebrating this year with our customers, our past and
present staff, our suppliers and our shareholders and an exciting programme
has been pulled together. The big in-store birthday party will happen in
June but we will have many events throughout the whole year. One of our
goals for this year is to raise $150,000 for the Wellington Children''s
Hospital as we believe that we should put back into the community from which
we make our living.
I would like to thank the ''Kirks'' team, our customers, who constantly give us
feedback on what they want, and our shareholders for your continued support.
Mr John Milford
Kirkcaldie & Stains Limited
P: 04 472 5899
End CA:00232857 For:KRK Type:ADDRESS Time:2013-02-13 08:43:13