KEY POINTS:
Christchurch-based retailer Smiths City Group said today its net profit fell 1.7 per cent to $3.56 million in the year to April.
Operating revenues fell 7.2 per cent to $252.4m, mostly reflecting the sale of its Christchurch-based building supplies business.
Same stores sales revenue fell 2.2 per cent.
The result comes after New Zealand's biggest retailers, The Warehouse and the Briscoes Group, announce profit downgrades.
Smiths City cut its unimputed dividend to 3 cents per share from four. Managing director Craig Boyce said it was difficult to see any change to the overall economic environment.
"Whilst tax cuts and a strong rural economy would ordinarily be in our favour, this Government appears determined to control inflation through stifling any growth in consumer spending.
"As a result we are unlikely to see growth in demand but will continue to see increases in costs such as fuel, interest and rentals."
He said the lower dividend reflected the need to be prudent in regard to cash reserves in difficult trading conditions.
"Retail trading conditions over the last two years have been challenging and the period since Christmas 2007 particularly difficult as household budgets have come under extra pressure from the continually increasing costs of food, electricity, petrol and interest.
"In conditions such as these it is acknowledged that big ticket products - kitchen appliances; furniture; flooring etc - are among the first items to be cut from discretionary household expenditure."
On the question of buying big ticket items, consumers in the Westpac Consumer Confidence Survey this week felt it was the second worst time to buy in the 20-year history of the survey.
Boyce said businesses like Smiths City needed to maintain market share and retain important suppliers in such times.
They also had to reduce sale and distribution costs.
He said finance remained a key part of Smith City and Smithcorp Finance continued to contribute positively to the result.
The North Island expansion was progressing in a stepped manner, reflecting the current trading environment, he said.
The company was seeing improving returns from its North Island stores.
Smith City shares were untraded today and last traded at 40 cents. They have fallen from 69 cents in July.
- NZPA
