EXCLUSIVE: Next Byte stores to become Apple-exclusive as Vita Group changes strategy

In a project worth $10m-$12m, it will upgrade all of Next Byte's "old format" stores to Apple-exclusive stores in two years via shutdowns or relocations

Vita Group, owner of retail brands Fone Zone, Next Byte, and One Zero, has drawn up a “realigned growth strategy” for Next Byte, which includes a significant cost reduction program in retail stores and Next Byte’s support centre, and a wind down of underperforming business channel.

The news comes with the Group's announcement on the ASX that it will record a non-cash impairment charge between $12m and $15m related to its Next Byte business for FY12.

As a result, Vita's EBIT will be a loss of $4m, according to Vita Group joint CEO, David McMahon. It expects its underlying EBITDA will be between $15m and $18m that does not take into account the Next Byte impairment charge.

The realigned growth strategy for Next Byte includes a plan to either relocate or refurbish 15 of its existing "old format" stores into exclusive Apple stores under Apple's premium reseller program, McMahon said.

Its four new Apple stores had been doing well because of their location in busier shopping malls and metros, and Vita would like to repeat that with additional stores, he said.

Staff cuts won't be a part of the cost-cutting as Vita plans to hire more staff to man the larger stores, McMahon said.

The business is expected to have a positive contribution in the second half in part due to the strong performance from its larger format new Apple Premium Reseller stories located in Townsville, Mackay, Rockhampton and Cairns, relative to existing “old format” stores, said the statement.

It would need to invest between $10m to $12m toward the new growth strategy, he said, adding Vita plans to fund it through its existing lenders.

The Next Byte business has changed substantially since we acquired it five years ago given a number of internal and external factors,” said McMahon, adding that a tough retail environment impacted the business.

“Vita Group remains committed to the Next Byte business, and has responded by developing a new growth strategy centred around new format stores in new targeted locations.

“Vita Group telecommunications continues to perform well, underpinning the growth in earnings as more new Telstra stories mature and we expand our retail store footprint in key markets nationally.”

The move comes as Apple continues to open more stores in Sydney, the latest in Broadway, in doing so making life even more difficult for its number one reseller.

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