API has announced plans to “rationalise” the Priceline network with the closure of 14 stores
In a statement foreshadowing its financial results for the year ended 31 August 2020, the wholesaler said that the decision to trim down the Priceline network – of Priceline stores, not including Priceline Pharmacies – followed examination of how COVID-19 had impacted business.
The decision followed a consideration of the “long-term impacts of COVID-19 on foot traffic in CBDs and shopping centres relative to on-going rents,” API said.
“These stores do not benefit from the additional foot traffic that dispensaries provide to Priceline Pharmacies.
“This decision will result in the Priceline network reducing by a net 14 stores.”
However, “the pipeline for new Priceline Pharmacies remains strong and relatively unimpacted by COVID-19”.
When announcing its financial results on 22 October 2020, API expects to report Underlying Net Profit after Tax in the range of $30 million to $31 million for the year ended 31 August 2020.
“With the mandated closure of non-pharmacy Priceline stores at various times during the pandemic and the decision to reduce stores by a net 14, API completed a detailed review of stock holdings and identified specific inventory that would benefit from pricing support to accelerate clearance, further reducing working capital. This decision results in an NPAT reduction of $5.5million.
“This is a non-cash accounting adjustment that reduces the carrying value of Inventory on API’s balance sheet,” it said.
API also said that while it will continue to support the Soul Pattinson Chemist network, “we have written down the carrying value of $37.5 million. This pre-tax reduction of $37.5 million is a one-off, non-cash item writing down the carrying value of the Soul Pattinson brand name on the balance sheet”.
“While these two adjustments are necessary at this time, the Underlying NPAT and our strong balance sheet show that we are successfully executing our strategic priorities to deliver sustained shareholder value,” said CEO and managing director of API, Richard Vincent.
“We currently have 14 Clear Skincare clinics and 22 Priceline company-owned stores temporarily closed in Victoria. These will re-open when COVID-19 lockdown rules allow.
“Where we have re-opened Clear Skincare clinics after mandated shutdowns, pent-up demand has been significant, with comparative sales up 25% on pre COVID-19 levels, followed by a sustained uplift.
“Priceline company stores and Priceline Pharmacies are also trading strongly compared to the same period last year in those States where COVID-19 restrictions have been lifted.
“Priceline’s online sales reflect growth of more than 100%, albeit from a low but growing base,” Mr Vincent said.