Lingering summer sun burns The Warehouse

The Indian summer has hit third-quarter sales, but The Warehouse still expects to make previously forecast full-year profits.

That promise helped temper news of falling same-store sales at the company's New Zealand discount general stores and its stationery arm, and a contraction in Australian sales made worse by exchange rates.

Group sales fell 0.9 per cent to $489 million, from $494 million in the third quarter of last year.

Chief executive Ian Morrice said he was not surprised to see a drop in sales in New Zealand because the company was introducing changes to better position it for the long term.

"We're working hard to get the sales position into growth as soon as we can, but also it's important that we bed in the changes that we're making and we can sustain the changes that we're making," he said.

The company was on track to meet guidance it gave in January for a full-year profit of between $66 million and $71 million, assuming trading conditions were maintained.

The finely balanced statement initially failed to appease investors. The share price tumbled 10c to levels not seen since January 1999, but it recovered to close down 3c at $3.34.

Macquarie Equities analyst Warren Doak said although the statement as a whole was "neither good nor bad" stocks depending on the domestic economy were out of favour. "This is a market which is not going to reward success - but will severely punish failure."

Analysts said sales at the Red Sheds were slightly softer than expected.

The slow start to winter sales for clothing and seasonal products such as heaters combined with a disappointing Easter to more than offset growth in home entertainment and electronics.

Sales at The Warehouse New Zealand were up 0.9 per cent to $328 million for the quarter, but same-store sales fell 2.5 per cent.

Sales at The Warehouse Australia were down 8 per cent to $108 million, though they only fell 3 per cent in Australian dollars. Same-store sales were down 4.9 per cent.

Morrice said the Australian operations remained on track to substantially reduce losses this year and break even in the coming financial year.

The Warehouse Stationery sales were up 3.7 per cent to almost $53 million, that was mostly due to positive results at the store's business-to-business channel. Same-store sales were 4.7 per cent lower, as lower computer sales more than offset back-to-school business.

Morrice was coy about the fourth-quarter sales outlook.

Some analysts said it would be hard to deliver full-year forecasts without positive fourth quarter sales even if operating margins improved, but Morrice said the company was "certainly budgeting on sales growth over the next [financial] year".