Bahamas News

Abaco Markets in the Bahamas yesterday said it expected to generate a net profit in its next fiscal year, providing further evidence that it might be putting a bleak three-and-a-half years behind it by unveiling a 14 per cent increase in its December 1005 sales over the previous year.

The increase in December sales, which included the busy Christmas period, exceeded the company’s expectations and gives shareholders in the Bahamas International Securities Exchange (BISX) listed retail group hope that it is poised for a better future after three successive years of losses and declining share price.

David Thurlow, Abaco Markets’ president, attributed the improved performance to an increased focus on operation issues, now that the company’s $7 million store improvement programme was completed. Management had also built up considerable experience in running the business over the past three years.

Gavin Watchorn, Abaco Markets chief financial officer, told The Tribune that better merchandising and more inventory had also played its part in the improved December showing.

He added: The momentum has carried through to January, which is traditionally a slow month. It won’t be as high as 14 per cent, but we do expect reasonable [sales] growth in January.

Mr Thurlow told The Tribune in an exclusive interview. We’re a lot happier than we were even six months ago, as we’re seeing the fruits of our labor coming through. We should see some of that [sales growth] come down to the bottom line.

We’ve been working hard to contain our fixed overheads, and are going into a new year with more appropriate level of overheads than we had last year. The business model is pretty much back in sync.

Despite the December sales growth, Mr Thurlow said that whether Abaco Markets achieved a profit in the fourth quarter of the fiscal year that ends today depends on the extent of an inventory write-off relating to its Abaco operations.

But for the year ending on January 31, 2007, he added: We’re expecting to be profitable in 2006. Whether we’re profitable in the first quarter remains to be seen, but for the whole of 2006 we certainly expect to be profitable.

Abaco Markets has a $100 million sales target for its new fiscal year, although for the period ending today, it is likely to be just below the $95 million sales level it requires to break even, coming in at $93.5 million.

The BISX-listed retailer also expects to reverse in its fiscal 2006 fourth quarter the margin decline it suffered during the previous three months that ended on October 31, 2005. Margins for that quarter fell from 29.9 per cent in the 2004 comparative period to 28.23 per cent, caused largely by shrink, loss and damage, and operational difficulties with perishable product and clothing.

Increased sales of general merchandise such as clothing during the Christmas period, which typically carries higher margins, were expected to boost Abaco Markets’ margins during the final quarter.

Mr Thurlow acknowledged that Abaco was the group’s one weak point at the moment, something it had moved to address through operational streaming and management changes.

He added: We’re hoping that’s going to lead to a fairly quick turnaround, although with some inventory write-off in the process, it will affect margins in the fourth quarter.

Mr Thurlow’s contract with Abaco Markets runs out today, although he will be staying at the company’s helm until the Board chooses a successor.

Describing the process of finding a replacement was underway, Mr Thurlow said: It will happen before the end of 2006. The transition is under consideration.

He added, though, that he hoped to be around to see Abaco Markets’ turnaround completed. The company’s focus was now on growing its business, initially through its existing store operations but eventually through new sites, an opportunity that is not far down the road.

I really think we’ve got momentum going into 2006, Mr Thurlow said. We’re a lot more comfortable where we are now than we’ve been before, and we’ve got a stable situation now.

In the third quarter that ended on October 31, 2005, Abaco Markets saw its net loss drop by 57.6 per cent in comparison to the previous year, falling from $2.2 million in 2004 to $933,000.

Sales increased by 7 per cent to $22.3 million during that period growth at both the Solomons SuperCentre and Cost Right stores in Nassau, but stripping out the effects of the 2004 hurricanes left this essentially flat.

Third quarter expenses during 2005 were $6.9 million, compared to $6.6 million after hurricane adjustments for the previous year.

However, despite the impact from high electricity prices, higher spending on repairs and maintenance, non-budgeted professional fees and an unexpected cost variance of $100,000 related to a Freeport building contract, Abaco markets said its expense for the first nine months in 2005 were slightly lower than the previous year’s.

By Neil Hartnell
Tribune Business Editor