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A bumper Christmas helped The Warehouse Group bounce back into the black in the first half of its financial year, but the retail chain faces a tough second half, if the Reserve Bank's rate hikes start to bite.
The Warehouse made a net profit for the six months to January 28 of $61 million against an $8 million loss a year earlier, caused by the divestment of its Australian business.
Chief executive Ian Morrice said a late surge at Christmas made it the best in three years, but the company could still do better. Morrice was comfortable with a consensus of market forecasts for the full year of a profit of $96 million but said retail conditions would be challenging for the rest of the year, especially after the Reserve Bank's 25-basis-point rate hike on Thursday.
Analysts said his comment on consensus forecasts was realistic, especially given the Reserve Bank's move and the likelihood of more rises further down the track.
Goldman Sachs JB Were strategist Bernard Doyle said The Warehouse was not being overly conservative in its outlook.
Morrice said trading conditions since January have been firm, with the company experiencing same store sales growth of 6.6 per cent last month. He said later that the company was looking at its capital management options, which could mean acquisitions or a return of capital to shareholders.
Doyle said the sales performance last month had been impressive, especially since other retailers had experienced more trying conditions. "Given what we have seen from other retailers and their comments on trading conditions in New Zealand at the moment, it looks like a reasonably strong outcome for The Warehouse," he said.
Doyle said the RBNZ's rate hike would make it difficult for the retail sector, but The Warehouse had a good track record of performing in tough conditions because of the so-called "trade-down effect" as people seek bargains to stretch their dollars further. Shares in The Warehouse closed at $6.88 on Friday, up 12 cents.
