Warehouse future under scrutiny

Warehouse CEO Ian Morrice is likely to field questions today on the likelihood of buying Foodland’s NZ assets. Picture / Martin Sykes

The focus will be on the future when The Warehouse reports what is expected to be a $5 million drop in its half-year profit today.

The release of profit forecasts by the company less than a month ago has already taken much of the mystery out of events: the discount retailer said it anticipated a net profit after tax of between $50 million and $54 million for the half year ended January 30. Not surprisingly, the consensus forecast by analysts is for a $51.5 million interim profit.

But chief executive Ian Morrice's outlook for the future will still be closely watched and he is likely to field some hard questions on whether The Warehouse might be interested in buying the New Zealand supermarket assets of Australian grocer Foodland.

Foodland has said it plans to spin off those assets, which include the Foodtown, Countdown and Woolworths chains, and list them on the Australian Stock Exchange within four to six months.

One analyst said that a good manager would look at any opportunity - or threat - and if it was not interested in buying the chains itself The Warehouse should be studying what the upheaval for its competitor could mean for its own business.

There will also be interest in how successful the company has been at winning discounts from suppliers, after the Business Herald reported the company had asked some for a 10 per cent discount at a series of meetings last month.

As the company has already said operating margins contracted and same-store sales fell 1.3 per cent in November and December, analysts said the results were likely to be "very, very vanilla".

"The obvious area of risk could be the extent of the margin contraction in New Zealand and whether or not that's offset by better margins in Australia," Macquarie Equities analyst Warren Doak said. There could be some surprise at how good the Australian margins were.

Morrice took the top role in August and has said he wants to refocus the company away from delivering bargains and little else, towards what customers want and creating a better shopping environment. But Doak said his efforts would not be seen in the latest result.

"It will be broadly immune from his input."

Elsewhere in the market, the week will keep its retail flavour, with Statistics New Zealand reporting retail sales for January today. A survey by Bloomberg predicts a seasonally adjusted 0.7 per cent increase since December - the fourth month in five that retail sales have risen. And, on Friday, Briscoe Group will report annual results.

Outside retail investment company Masthead will tomorrow lodge formal offer documents for its $49 million hostile bid for Vertex.