Renaissance shares drop 33% following $3m loss

Renaissance has endured a tough past 12 months, and recent financial reports suggest circumstances haven't improved.

Even after the non-continuing distribution business was stripped out of the financials, the Auckland-based retailer and educator's revenue still shrunk 13%.

Fearing worse was the company's bottom-line, plummeting from a $1.96m profit in the past six months ending 31 March 2012 to a staggering $3.125m in 2013.

Revealed today in an interim reported issued to the New Zealand Stock Exchange, Renaissance blamed retail as the main factor in falling revenue.

"Retail has been the main reason for the poor performance in the first half of 2013," the report read.

In the half year to March 31 retail made an operating EBIT loss, before impairment of goodwill, of $511,000, comparing with a profit of $164,000 in the same period last year.

"There have been issues, a combination of management and overall Apple supply and demand," Renaissance says.

"Before Christmas we were severely constrained for Apple stock. This was a worldwide phenomenon for Apple.

"After Christmas we have not had the benefit of new models to boost sales.

"Nonetheless we have lifted unit sales in all categories except iPhone."

Chairman's Interim Report

Speaking on behalf of the board of directors, chairman Colin Giffney was quick to express his disappointment at the results, stating:

"The result for this period is bitterly disappointing after everything we have been through.

"At the AGM at the end of March we expected to be able to put a proposal to shareholders in the near future.

"To date this has not been possible. We continue to work on different proposals and we will revert to shareholders as soon as we can."

The report says Apple revenue for the period was down 26%, with the company achieving lower per unit sale prices in all Apple product lines and unit sale prices of the iPad, since the advent of the 'mini' are down 28%.

When Apple announced their results for the quarter to March 31 Renaissance says it noted that revenue in "the rest of Asia" was down 20% on the immediately preceding quarter.

Apple does not share their results for New Zealand so a direct comparison is not possible claims Giffney, but when Apple sales are down, sales of third party products follow.

The company's average gross margin on Apple product declined from 11% in the first half of 2012 to 8% in the first half of 2013. Apple dropped its margins on mini iPads when they were introduced, contributing to the gross margin decline.

On top of that, many competitors use Apple product as a loss leader to attract customers to their store with Giffney insisting it has been a "tough environment."

"Over the period we have consistently missed budgeted revenues," he says. "We re-forecasted after December and we have missed those numbers.

"Retail has our full attention and we are working through solutions.

"The simplest analysis is that the overheads management needs to run the retail business are too high by comparison with our Apple-only international peers.

"Our retail division is work in progress and we are working systematically through options.

"We decided that we should write off the goodwill attributable to the retail division because the forecasts that had sustained that value at the full year have clearly not been met."

What do you make of Renaissance's financial report?