KEY POINTS:
Postie Plus Group shareholders have given the go ahead for the sale of the Arbuckles manchester and homewares chain.
The assets of the Arbuckles business are being sold to interests associated with retailer Jan Cameron for about $4 million.
Group chairman Peter van Rij told a special general meeting in Christchurch today that the sale would end a period of losses on the Arbuckles operation.
There would be a non-recurring, non-trading, loss on the transaction in the range of $2.4m to $2.6m, involving write-downs on goodwill and stock.
The significant reduction in stock would strengthen the group's financial position, he said.
The level of stock carried by the group had already been reduced to around $28m from the "excessive level" of around $38m a year ago.
With the sale of Arbuckles' stock the total would be down to around $24m, leading to reduced interest and warehousing costs.
Quitting Arbuckles would also result in a contribution of more than $1m a year in net profit towards the group in normal trading conditions, Mr van Rij said.
Under the Arbuckles deal, the Postie Plus Group would keep 13 of the Arbuckles stores for conversion into new selling space, while another 13 stores would transfer to the Cameron interests.
Selling Arbuckles enabled the group to increase the footprint for the successful Postie+, Baby City and Schooltex brands.
Mr van Rij said market conditions in manchester and homeware retail had become "highly competitive" since Arbuckles was acquired in 2003 as part of the group's initial public offering that year.
Arbuckles' staple manchester product lines had been aggressively discounted by most if not all manchester retailers as loss leaders for the past three to four years, he said.
"This segment has become tougher with large competitors increasing their presence."
The group had addressed that increase in discounting by increasing market share and expanding the retail footprint for Arbuckles from 20 to 30 stores.
A new look offer gained traction but could not compensate for more recent aggressive discounting.
Postie Plus Group shares were unchanged at 40c around lunchtime today, near its year low, down from 89c last September.
Group earnings guidance is expected to be provided later this week.
- NZPA
