Cut-throat pricing puts Leeming in red

Noel Leeming Group has struggled to make money since it was bought out by a private equity firm in 2004. Photo / Natalie Slade

Consumers are benefiting from cut-throat competition among appliance retailers, with rival chains bleeding red ink.

The latest accounts filed by Noel Leeming Group with the Companies Office show the group made a pre-tax loss of $5.1 million in the year to March, despite a 5.7 per cent increase in sales to more than half a billion dollars.

The group, which includes the Bond & Bond retail chain, has more than 80 stores throughout New Zealand.

However, it has struggled to make money since it was bought by Australian private equity firm Gresham for about $138 million in 2004.

In 2008, the company made a $9 million pre-tax profit, but this plunged to a $6.2 million loss the following year.

Three years ago, Gresham confirmed it was in talks to sell at least one of the two chains, but no sale eventuated. Its insurance arm, NLG Insurance, has since stopped writing new contracts and its cash was shifted elsewhere in the group.

Last year the company breached its banking convenants and Gresham was forced to pump another $15 million into the company to keep its bankers happy.

BOS International agreed to new terms, with about $75 million in loans now due to be repaid by June next year.

In July, Fisher & Paykel ended its exclusive dealership arrangements with Noel Leeming and Farmers to take advantage of growing competition in the sector.

But since then one of Noel Leeming's key rivals, Australian listed retailer JB Hi-Fi, has also revealed that it is finding the market a tough one to crack.

With just 10 stores in New Zealand at the end of June, JB Hi-Fi said in August that it had increased its losses during the year from A$2.9 million to A$3.5 million.

It has blamed fierce competition and a lack of scale for squeezing its margins.

In 2006, JB Hi-Fi bought the Hill and Stewart chain from its management. It has since closed several of the stores and rebranded others.