Vita Group (ASX:VTG) is plotting an expansion of its Apple reseller chain, Next Byte, but could rationalise its Fone Zone mobile dealership business due to decreasing revenues.
Vita Group CEO, David McMahon, said it would realign some of its current Fone Zone operations over the next three months. Options under consideration include relocating particular Fone Zone stores, converting some of them to the Next Byte brand and closing those stores running at a loss.
McMahon stressed that no stores had been earmarked for closure at this stage and predicted the realignment process will only affect about 10 to 15 per cent of the retailer's 146 nationwide outlets.
"We think it would have a positive impact on the business from a profit point of view between $1.5 to $2 million," he said.
McMahon attributed Fone Zone's profit decline to low retail sales and customer delays in upgrading their handsets.
"We're seeing that customers are still happy to commit to a 12- or 24-month contract but in many circumstances they're not making an acquisition of another handset. For us from a margin point of view that's one of the more profitable parts of the business and if customers aren't buying handsets then they're not buying accessories, warrantees and insurance," he said. "From about April onwards we've seen a very sharp decline in that level of transaction and handset sales for us and that's really triggered the revised profit outlook."
On the flip side, McMahon said Next Byte stores had been performing ahead of expectations and it planned to establish 40-50 stores nationally. There are currently 23 Next Byte outlets.
"We still see some growth opportunity in metro areas but we're also starting to focus on the stronger regional areas outside of the major cities," he said.
Vita Group now expects to record pre-tax profits of $18 to $19 million in the current financial year, which is down from the previous guidance figures of $23.5 to $24.5 million.