Noni B Hacks And Cuts
June 19 2008 - Australasian Investment Review – (AIR)

In part Sydney-based women’s fashion wear retailer, Noni B’s attempts to expand its footprint have been brought up short by the Reserve Bank’s attack on inflation through higher interest rates.

Noni B said yesterday that it was is abandoning its loss-making La Voca chain after growing losses and falling sales loomed as a threat to the company’s overall results.

And, to keep investors happy after the share price dropped sharply from the earnings downgrade in February, Noni B says it will run a share buyback over the next year to cover 10% of the issued shares: a move that will effectively increase the Kindl family’s already strong control over the company, even further. The Kindl family owns around 40% of Noni B at the moment and it should rise to around 44%.

The shares rose more than 4% or 9c to $2.05 yesterday, bouncing from near their 52 year lows of $1.90. It’s a long way from the high of $4.88 reached last August.

The ambitions for La Voca were ambitious when it was announced almost two years ago. This is what the 2007 AGM was told:

“The launch of La Voca in August 2006 has given us a third brand and second store concept. La Voca products are very different from the Noni and Liz Jordan brands sold exclusively in our Noni B stores; they have expanded our reach into the top segment of the women’s fashion market, where average spend is greatest.

“With two store concepts focusing on different segments of the market, we are now able to have two stores in the same shopping centre, thus increasing our growth prospects.

“So far, we have opened 19 La Voca stores – four since the beginning of July 2007. This is a long-term strategy which may take up to three years to make a significant profit contribution, and I am pleased to report early signs of customer enthusiasm for the brand, and that our plan is on track.”

On track at the AGM in late October, dead in mid June the following year, and retail sales have slid to a halt in the meantime after peaking in the last quarter of 2007 as the RBA’s tough anti-inflation line has taken hold.

The La Voca store concept made an after-tax loss of $800,000 in the first half of fiscal 2008 and it will now disappear in a restructuring revealed yesterday in a statement to the ASX.

Noni B chairman Robert Critchley said in the statement that La Voca has faced significant headwinds, with consumer demand weakening over the past year.

“The stores are taking longer to make a profit than we anticipated and more value will be created for our shareholders through focusing all management resources and energy on the growth of our core Noni B business,” he told the ASX.

There are currently 19 La Voca stores and, subject to lessors’ approval, approximately half of these will be re-branded Noni B, bringing the number of Noni B stores to at least 208 across Australia.

Noni B, which also owns the Liz Jordan brand, said negotiations will take place with the remaining store lessors, with the aim of relinquishing the leases.

“Staff will be offered opportunities in Noni B stores wherever possible,” the company said.

The non-recurring restructure costs are expected to total between $1.8 million and $2.5 million after tax, the company said.

“Further trading losses by La Voca and lower than anticipated earnings by Noni B stores in May and June are expected to result in a full year 2008 after-tax profit for the group of between $5 million and $5.5 million before restructuring costs,” it said.

“Following the restructuring of La Voca, and with management focusing solely on the Noni B business, the company conservatively expects FY2009 after-tax profit will be between $6.5 million and $7.5 million.”

The company also announced that it intends to pay a 10c fully franked final dividend for full year 2008, in line with full year 2007.

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