Noni B is looking for the right fit

Noni B (ASX: NBL), the women’s apparel and accessories retailer, reported a net loss of $3.5 million, down from last year’s $2.68 million profit. Revenue was up slightly by 1.6% to $124 million. The loss resulted from a $5 million non-cash impairment charge of the remaining goodwill created when the company listed on the ASX back in 2000.

As of the 30 June balance date, it operated 219 stores nationwide in addition to a webshop that sells locally and internationally. Eight stores were opened, and four underperforming stores were closed.

Online sales have been increasing, and the company’s loyalty club added 95,000 new members, bringing the total to over 1 million. This is a similar move as was done by other clothing retailers such as Specialty Fashion Group (ASX: SFH) and David Jones (ASX: DJS) to expand their “clicks and bricks” marketing as more customers choose to shop online.

The lower consumer confidence about the economy was reflected in the weak retail sales, especially for women’s fashion.

Excluding the $5 million impairment charge, underlying profit after tax was $1.5 million. The company decided to reduce inventory levels, working out to be 11.4% lower this year, based on the outlook of weak market conditions. Additionally, a one-off write-off of $400,000 on aged inventory was declared- the first such write-off in over five years.

Total debt has been reduced to $220,000, and the cash balance rose by $600,000 to $9.9 million. Occupancy expenses rose by $1.3 million, mostly due to the addition of four new stores and contractual store rent increases.

Net profit margins were really hit this year, down to 1.26% from 2.24% last year. Return on equity fell to 7.6% so it is still quite far off from where it once was before the GFC, but should the economy pick up, it has that potential to jump up in share price because the fat has been trimmed.

Book value per share of $0.66 is almost equal to its share price of around $0.68. No final dividend was declared.

Foolish takeaway

Good management of debt, cash and inventory are the trademarks of successful companies because they are ready for the hard years that everyone knows eventually have to come. When the market turns, the companies best prepared come off the starting blocks with great speed.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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