CORRECT: Kirkcaldie & Stains flags October for possible capital return, mulls future of store
Kirckcaldie & Stains, the unprofitable Wellington department store, is waiting for a new chief executive and the final payment from the buyer of its Harbour City Centre before deciding whether to return the proceeds to shareholders.
The retailer is considering a possible capital return, most likely in the form of an off-market share buyback, to return some of the proceeds from last year's sale of its iconic inner-city building in Wellington, chairman Falcon Clouston told shareholders at the annual meeting in Wellington yesterday. After paying off $23.5 million in bank debt, the sale has netted $16.8 million to date but Clouston said the board is still awaiting a final instalment of $4.75 million in October.
Further slowing the process is the company's hunt for a new chief executive to replace outgoing John Milford, who resigned after eight years, Clouston said. The board is considering three options to return the business to profitability - a focus on a retail turnaround, which would take three-to-five years and considerable investment, downsizing or divesting the business altogether, but won't make a decision until after the CEO appointment.
"Until we get that person we don't want to make too many more decisions about redeveloping the shop etc, unless we have the right person to do this," Clouston told BusinessDesk after the meeting. "The redevelopment will cost a reasonable amount of money, between $8 million to $10 million, or something like that. It's not going to take all the rest of the money but we've got to look at other stakeholders, we've got a long lease so we're very mindful of that and we'll dish the money out as and when we can see to do that."
Like many retailers, Kirkcaldie has come under pressure as bricks-and-mortar stores are forced to discount stock to compete with online rivals. Department stores in particular have come under pressure, including Australia's oldest department store, David Jones, which was taken over by South Africa's Woolworths Holdings and delisted from the ASX last year after sales and profitability fell.
Kirkcaldie last year reported a net loss of $6.5 million, from a profit of $168,000 a year earlier. That included a $4.3 million loss on the sale of its Wellington property, a $1.1 million impairment charge on property, plant and equipment, and a $406,000 charge on intangible assets. Sales fell 2.5 percent to $35.6 million.
Other listed retailers, such as Kathmandu Holdings, Warehouse Group and Pumpkin Patch, all flagged weaker sales in the lead up to Christmas, saying unseasonal weather had weighed on trading.
Clouston said he is cautiously optimistic and expects retailing to improve in 2015. For the five months through to Jan. 31, the retailer was ahead of budget, he said, without being more specific, although summer sale were slightly down on the previous year.
"We did very well over Christmas," Clouston said. "September through to January we're ahead of budget, and 3 percent up on the previous year, and we've done quite well."
Shares of Kirkcaldie were unchanged at $1.65 and have declined 2.9 percent this year.