Womenswear retailer Noni B has struck a $1 deal with major shareholder Alceon to take control of EziBuy, becoming the online clothing and homewares seller's fourth owner in the last decade.
The company has also reported a strong start to the financial year, with earnings for the first four months up $9 million on the prior corresponding period despite a "very challenging" trading environment.
Noni B chairman Richard Facioni (left) and chief executive Scott Evans.Credit: James Alcock
Noni B chief executive Scott Evans said the company had purchased a 50.1 per cent stake in EziBuy from Alceon for one dollar, with the option to buy the remaining 49.9 per cent of the Kiwi retailer by the end of 2020 for $11 million in cash.
"It's an almost risk-free transaction," he said. "We've got two Christmases to prove this business can actually make a decent profit, and if we don't ... then we just don't exercise the option."
"It's effectively a 'try before you buy' situation."
Alceon holds a 35.9 per cent stake in Noni B, and the company's executive director, Richard Facioni, is also the retailer's chairman.
It ticks all the boxes on a very risk-limited basis.
Chief executive Scott Evans
Noni B's brands include Noni B, Millers, W Lane, Rivers, Katies, Rockmans and Crossroads, with a combined store count of over 1300 across Australia and New Zealand.
EziBuy is an Auckland-based online retailer founded in 1978 which sells a range of men's and women's clothing, along with various homewares and beauty ranges.
It was acquired by retail giant Woolworths in 2013 for $309 million, which four years later sold it to Alceon after writing its value down to just $30 million.
Mr Evans admitted the company had been "passed around a little bit", but said Noni B was well-placed to benefit from EziBuy's scale and the online retailer offered a lot to the business.
Noni B's brand portfolio includes discount fashion brand Rivers.Credit: Ken Irwin
"It gives us exposure into New Zealand, it gives us an additional customer database and it gives us a lot more categories to offer digitally," he said.
"It ticks all the boxes on a very risk-limited basis."
Noni B is aiming for the acquisition to double its online sales to 20 per cent of revenue, and has identified $9 million in synergies between the two companies.
In 2019, EziBuy reported $NZ144 million in revenue ($135 million) and earnings before interest, tax, depreciation and amortisation (EBITDA) of $NZ400,000.
'No impact' from tax cuts
Acquisitions aside, the business reported a strong start to the 2020 financial year, with EBITDA for the first four months of trade up $9 million on the year prior.
This was fuelled by a focus on margins over sales and aided by comparable sales growth at the recently acquired Millers, Katies, Crossroads, Autograph and Rivers brands.
However, comparable sales across the group fell 4 per cent for the period, with Mr Evans saying the retail environment was "very challenging" as the company approached the key Christmas period. Tax and interest rate cuts had also been no help, he said.
"As we sit here today, we don't see any impact from the interest rate cuts nor the $1000 tax cuts," Mr Evans said. "We know a lot of retailers and that seems to be the common sentiment."
After a volatile session, Noni B shares ended down 3.5 per cent at $2.46.