Warehouse cuts profit guidance, blames margin pressures

Mark Powell, chief executive of The Warehouse, said today that margin pressures mean the company now expects full year adjusted net profits to be between $62m and $66m - down from the forecast $70m. Photo /Paul Estcourt.

Warehouse Group, the country's biggest listed retailer, cut its guidance on adjusted profit for the current financial year, blaming a squeeze on margins in recent months.

The retailer expects adjusted net profit of between $62 million and $66 million in the year ending July 27, down from a previous forecast of $70 million, it said in a statement.

Net profit will likely be about $80 million, in line with previous guidance.

"Margin pressures experienced in recent months" was to blame for the downgrade, the retailer said.

The profit warning comes a day after Briscoe Group, the home ware and sporting goods chain, boosted fourth-quarter earnings, and flagged annual profit would be at least 25 per cent higher than a year earlier.

Warehouse sales rose 4.2 per cent in the three months ended Jan. 29 compared to the same period a year earlier, with same store sales up 3.1 per cent. Warehouse Stationery sales gained 2.5 per cent, and same-store sales gained 4.4 per cent.

Chief executive Mark Powell said "trading conditions were quite challenging in the lead up to Christmas, but retail sales eventually proved buoyant through the key late December period and in January."

He singled out the retailer's apparel range as an area that came under particular margin pressure through period.

Retailers have had to contend with tepid consumer demand as households eschew taking on new debt in favour of repaying outstanding loans. That's seen a major build-up in inventories, which bolstered economic growth through last year, and forced retail stores to discount their goods in an effort to shift them.

Warehouse shares rose 0.7 per cent to $3.05 in trading yesterday.