KEY POINTS:
Retailer The Warehouse Group today forecast tough trading conditions to continue, and a lower full-year net profit.
It forecast a July year net profit in the range of $94-98 million, including an $8m warranty provision reversal. Last year it made a net profit of $98m, excluding one-offs.
Today
it has reported a half-year net profit up 6.9 per cent from a year ago to $64.3m.
The result for the six months to January 27 included a $7.2m reversal of warranty provisions relating to the sale of The Warehouse Australia in 2005.
After excluding that benefit net profit for the year was down 5.1 per cent to $57.1m.
Chief executive Ian Morrice said retail activity was likely to continue slowing over the remainder of this year as discretionary spending came under further pressure from economic factors and inflation bites.
Revenue in the half year was flat at $950.6m, while operating profit was down 10.8 per cent to $83.3m.
Same store sales were up just 0.3 per cent for the half year - well below the 3.2 per cent inflation rate, and up 1 per cent for the second quarter.
The Warehouse is being lined up for takeover by both supermarket operators in New Zealand, Foodstuffs and Australia's Woolworths, both of which own 10 per cent. The Commerce Commission is legally challenging their right to make takeover bids.
Chairman Keith Smith said achieving positive same store sales growth in the second quarter demonstrated an ability to respond to what he said had been a very challenging environment.
"This result is creditable given present trading conditions. "Achieving positive same store sales growth in the second quarter demonstrates an ability to respond to what has been a very challenging environment."
Mr Morrice said that while the company had held sales, gross margin in some categories had been affected by targeted investment in price and stock clearance.
The company announced an interim dividend of 15.5 cents per share, an increase of 3.5 cps.
The Warehouse New Zealand - the Red Sheds - reported modest top-line growth with sales up 0.4 per cent to $852.9m and same store sales up 0.3 per cent for the half year.
Second quarter same store sales was up 1.0 per cent. Operating profit was down 11.7 per cent to $79.4m.
Mr Morrice said while sales held up, gross margin in some categories had been affected by targeted investment in price and stock clearance.
Mr Morrice said its large format Extra stores had shown improved performance.
Sales at Warehouse Stationery fell 4.6 per cent to $96.6m with same store sales down 1.8 per cent and operating profit fell 23 per cent to $2.6m. Operating margins fell to 2.7 per cent from 3.3 per cent.
Group net debt increased to $115.3m from $91.3m and gearing increased to 25 per cent from 19 per cent. Operating cashflow rose $4.1m to $64.7m due mainly to a decrease in net trade working capital.
The Warehouse shares closed on $6.00 yesterday. They have dropped 18 per cent from $7.32 in April.
- NZPA