The prolonged and unpredictable economic recovery has impacted on big-ticket retail, with about 60 stores closing, Smiths City Group chairman Craig Boyce says.
Speaking at the company's annual meeting in Christchurch yesterday, Boyce estimated 40 furniture and 20 appliance stores had closed in the South Island and lower North Island during the recession.
During the last three years, furniture and flooring sales had plummeted about 20 percent, while fierce competition and tight margins had partially nullified modest growth in appliance sales.
New market entrants, such as Australian heavyweight JB Hi-Fi, had also struggled to get traction, reporting losses following forays into New Zealand, he said.
"In appliances, we still see new Australian entrants but they are finding it very hard to make a start in a greenfield site with no history," he says.
For the April year, Smiths City Group reported an after-tax profit of $1.64 million, up 61.8 percent on the previous year, but still below the $3.56 million of 2008.
This increased profit is despite a 5.3 percent drop in revenue to $226.1 million from $238.8 million.
The accounts show the increased profits can be partly attributed to lower interest rates, with the company paying $1.67 million on interest in 2010, compared with $2.38 million the previous year.
Boyce said in the past three years overall sales value for Smiths City had declined by about 20 percent, including 10 percent on retail sales but he was proud the company had remained profitable.
Any recovery would be slow, with expectations of only 1 percent growth for 2010, he said.
"In the past I've predicted a strong upturn when emerging from a recession but this one is unpredictable and is now being referred to as a grumpy recession."
Like many retailers, Smiths City's point-of-sale margins have been squeezed, but some revenue was clawed back in other parts of the business, including from in-house finance company Smithcorp Finance, he said.
The 2010 annual report shows Smithcorp Finance, which is bulk funded through Fisher & Paykel Finance, charged customers between 15.95 percent and 22.95 percent interest on hire purchases.
Chief executive Rick Hellings said Smithcorp was one advantage Smiths City had over competitors, encouraging customer loyalty and providing a massive database of marketing information.
"Owning a finance company retains profits and maximises our customer relationships," he says.
However, the 2010 annual report shows Smithcorp Finance had required a cash injection from Smiths City Group of $4 million in the past year.
The finance company has about 75,000 customers with an average loan of $1200, but the report also notes its trading had been affected by turbulence in the finance industry.
Hellings said the $1.64 million profit was positive but cautioned the increase came off a low base and more work was needed to improve financial performance.
Smiths City's shares were flat yesterday at 33 cents each, down from a 40 cent high in February.