Warehouse first half profit down

Leaner times for the Warehouse this last half-year. Herald file picture

The Warehouse today said its first half profit was $53.88 million, down 2.9 per cent on the same period a year ago but at the higher end of guidance issued in January.

The giant discount retailer said key factors in the reduced result were a contraction in earnings from its New Zealand Red Sheds business offset by a "solid operating earnings improvement" by its Australian Yellow Sheds.

The Warehouse said it expects to meet the reduced full year guidance issued in late January of net earnings of between $66 million and $71 million -- 8 to 16 per cent ahead of last year but down 19.5 per cent on its previous forecast.

The company said operating earnings at the previously troublesome yellow sheds had improved by $18.3m from the previous same period, while earnings at the Red Sheds were down by $12.6 million.

The Warehouse said the weaker result from its core Red Sheds "reflects a combination of disappointing performance in seasonal categories and impact on earnings from negative same store sales".

Meanwhile the Yellow Sheds' strong earnings "demonstrates improved margin and cost management".

The company's Blue Sheds or Warehouse Stationery chain suffered a poor operating result as sales suffered from later back-to-school sales and a lack of computer promotions.

Across the whole group, sales revenue was down 2.3 per cent to $1.214 billion for the half year and earnings before interest, tax, depreciation and amortisation was down 0.5 per cent to $122 million.

It declared an unchanged interim dividend of 10.5cps.

The company said the Red Sheds were suffering from lower margins. In the key apparel and footwear category, units sold increased by 6.1 per cent but price deflation meant overall sales fell 4.6 per cent.

The Warehouse was one of a number of retailers to issue downgraded forecasts as a result of a lacklustre Christmas sales period.

Today it said it had seen "disappointing performance in seasonal categories such as apparel, sporting goods, toys and gardening".

Meanwhile there had been a solid uplift in sales of low margin technology and entertainment goods.

It said the key elements of the Yellow Sheds result was "significant improvement" in operating earnings and improved margins.

The Yellow Sheds "remain on target for a substantial turnaround in operating losses for (financial year 2005) FY05".

Warehouse shares opened this morning at $3.94.

- NZPA