Deka bites the dust

Perth-based Foodland, which owns the Farmers Deka chain as well the Foodtown, Coustdown and 3 Guys supermarkets and Rattrays wholesale in New Zealand, says Deka has been losing money.

"A strategic review of the long-term viability of Deka has been prompted by both trading losses for the half of NZ$3.3 million and the prospect of a continuing deterioration in the performance of that business," it says in a statement.

Foodland says it has made a provision of A$20.7 million for dumping the Deka franchise. 17 of the key Deka sites will be transferred to the Farmers store network while 43 stores will be closed.

Deka has been facing an identity crisis in the New Zealand retail scene, which has seen a growing trend to specialisation and the need for a strong brand to succeed.

Foodland has reported a first half profit after tax and before abnormals of A$21.6 million to the end of January compared with A$38.5 million the year before.

Earnings per share fell 44% to A22.62 cents per share.

Foodland says it had strong sales growth of almost 6% in its retail grocery business, but Farmers' performance in New Zealand until early December was affected by a combination of adverse consumer sentiment and unfavourable seasonal conditions.

The New Zealand operations of Foodland account for nearly two-thirds of the company's sales revenue with the rest coming from its Western Australian wholesale business and Action supermarket chain.

An interim fully franked dividend of A26 cents per share has been declared.

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