Jun 2010 Financial News

H&L explores outsourcing, store redesign in reach for profit

Jun 18, 2010

The makeover of Rapid True Value stores will start showing results by August when the first store will be unveiled in Kingston, but Hardware and Lumber (H&L) Limited, the operating company for the chain, says it is still tidying up the project design and is unsure how much it will eventually cost.

The retailer is also on the hunt for property to develop new stores, even as it seeks to close out or expand the smaller operations in the chain of 13 outlets nationwide.

The project is the latest effort to return H&L to profitability, with new chief executive Simon Roberts promising shareholders this week that he aims to improve the company's financial position - sufficient to produce a return on equity of 20 per cent - by focusing on some critical issues.

"Working capital management has also taken a greater priority as we look beyond inventory management to improve collections and our overall cash position," he said at Monday's annual general meeting of H&L shareholders at Newport East in Kingston.

He has already produced a small operating profit of J$7 million for the first quarter ending March, but closed the period at a loss of J$9 million due to financing charges, following up on losses of J$10 million for FY2009

H&L also reported negative cash balance of $20.9 million in March, compared to a positive $266 million in the previous year.

The continuing losses have made one of the company's partners very unhappy. Maurice Facey, in a moment of candour, told shareholders of his company last week that he was unhappy with how H&L was being managed.

"A return to profitability is imperative," said Roberts, who on Monday was facing shareholders as CEO for the first time since his November 2009 appointment.

Already, the company has embarked on a plan to outsource its distribution function as a cost-saving measure, putting out requests for proposals earlier this quarter.

"We have a warehouse distribution product plan to customers and retailers where items are brought in, put away and stored as well as picked up and shipped to various locations, and we are seeking a third-party logistic provider for this," said Simon.

The H&L distribution network includes one main centre comprised of six stock storage locations. There is also a secondary distribution centre at New Port East according to the company's website, which mainly caters to the hardware/homeware side of the business, and one main warehouse which supports the locations of agricultural goods retailer, AgroGrace, another H&L operation described as the star of the group with first-quarter profits of J$34 million.

The Rapid True Value stores are being remodelled in the image of the American True Value chain, starting with the Lane store in Kingston due for completion mid-August, and followed by either the Montego Bay or Portmore outlets, Roberts said.

"The build-out plan is still being developed," he said.

"Specifics relating to the number and locations of stores are not yet finalised."

True Value is providing technical assistance, but no funding, for the project.


Source:
Jamaica Gleaner
Friday June 18, 2010

http://jamaica-gleaner.com/gleaner/20100618/business/business94.html