Retailer Noni B has announced plans to close seven underperforming stores, after yesterday it posted a 2.8% fall in profits after tax.
Noni B recorded a net profit of $1.89 million for the first six months of the year, dropping from $1.95 million to $1.89 million.
The company’s joint managing director, David Kindl, said in a statement Noni B had been affected by “difficult trading conditions” which had continued throughout November.
“Our average spend per customer was similar to the previous year, but shopping centre traffic into our stores was down,” he said.
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“Demand was weak in all states and territories, and especially Victoria, South Australia and Tasmania, but there were signs of improving sentiment in New South Wales.”
Thanks to the tough trading environment, Noni B has decided to close seven of its underperforming stores, as it continues to consolidate its network.
The first store on the chopping block was the brand’s Sydney CBD shop.
“This store has not been profitable and our decision to close it demonstrates our determination to discontinue any store that provides an inadequate return,” Kindl said.
Retail Doctor Group chief executive Brian Walker told SmartCompany companies should consider closing stores if they’ve exhausted every avenue to boost their trade.
“I’m sure Noni B has exhausted every avenue and has done its due diligence on the shops and ramped up local marketing and spoke to the landlords and still found they were losing money,” he says.
“If a brand’s done all these things and it’s still losing money, then closing shops is the right course of action.”
Kindl signalled that Noni B, like many retailers, has also been under pressure from rising rent costs.
“Approximately 30% of store leases have expired or are due to expire before the end of December 2014 and further rent reductions, in addition to those already negotiated, are expected,” he says.
“Where satisfactory terms cannot be negotiated, the store will be closed.”
The 37-year-old company has 218 stores nationally and also sells online.
“Webshop sales continued to grow and we introduced an international currency converter at the end of 2013,” Kindl said.
But despite the brand’s growing online presence, Kindl said overall the market remains challenging, with customers expecting discounted prices.
“Overall sales in January were disappointing, although initial sales of our 2014 autumn/winter range were encouraging, and margins continued the improved trend of the first half,” he said.
Walker says the profit decline is a sign of the increased competition in the market and the poor consumer confidence which prevailed for the majority of 2013.
“Really it’s only been the past two to three months where there has been more confidence,” Walker says.
“For Noni B I think it’s a case of watch this space. They’ve had a reasonably volatile time over the past few years… so I think the results reflect a bit to do with Noni B as well as trading conditions.”
Walker says in the next half the brand needs to focus on understanding their target consumer and look at their position in the market.
“They have challenges ahead as do many historical Australian retail brands. I see them as conservative 40 plus, possibly even 45 plus, women’s brand. I have a question mark over whether that’s where they want to be,” he says.
“We’re at the point of a major transformation of retailing in this country. The distance which protected us for many years is no longer there and visibility for consumers is greater than it’s ever been.”
Walker says this will be both a challenge and opportunity for Noni B.
“I’m sure it’s using this time to review its understanding of their core customer, its strategy and its brand because it seems to me to be a wise move.”