Gold prices, ‘luxury’ Sydney pawn store boosts Cash converters profits

Record gold prices and a new Sydney pawn store for upmarket exchanges of luxury handbags and watches have helped put some muscle in Cash Converters’ profits.

Gold jewellery accounts for $5 million of Cash Converters’ retail inventory, so bullion’s record price run has enable the subprime and pawn chain operator to cash in on items bought as gold was rising.

“The strong gold price is helping us as we turn over inventory purchased prior to this (December) half,” chief executive Sam Budiselik said as the company announced a 21 per cent jump in interim profit to $12.1 million.

“We could always scrap the gold we’ve got, the junk stuff we will buy and sell immediately to a scrapper,” he said.

“We don’t take exposure to the price but we do benefit when it floats up.”

Mr Budiselik also called out strong trading at Cash Converters’ relocated new “luxury” store in the Sydney suburb of Bondi Junction, where the company has consolidated its upmarket inventory of women’s handbags, watches, electronics and collectable footwear.

He said the luxury handbags in brands including Chanel and Louis Vuitton had proved particularly popular, both on the exchange and buying side.

“It is just enabling people to sell that item on the shelf they’re no longer using,” he said. “We offer an ability to do that rather than going through the hassle of Gumtree.

“So far, so good. The business was probably making a small profit (before it was relocated from another site in Bondi Junction), of maybe $20,000 or $30,000 a year; it should make us a couple of hundred now that we’re shifting this sort of inventory.”

Cash Converters’ has historically done well in tougher economic times when high interest rates and cost of living pressures forced lower-income households into selling goods.

However, Mr Budiselik said that with unemployment low, customers seemed to be “doing OK” at the moment..

“Obviously, rate cuts will start to help over time,” he said. “We favour people doing well. I’d like to see lower rates because our own borrowing costs will come down.”

Cash Converters attributed the earnings jump to better retail profits and its focus on lower-cost, longer-term loans.

Its so-called payday loans now comprise a reduced 18 per cent of its loan book, which declined 7 per cent to $274.4m.

The lending focus is now on bigger, longer loans to safer lenders, with its strategy also including consolidating ownership of its stores, many of which are still franchised.

Revenue was flat at $192.1m.

The group has nearly 670 stores in 15 countries, notably Australia, Britain and New Zealand.