Key Points:

Sales at The Warehouse Group for the period covering Christmas were down 2.5 per cent from the same time last year, as customers showed caution in a faltering economy.

Same store sales for the 10 weeks ended January 4 were 1.9 per cent lower than a year earlier, while margins were at levels similar to last year, the company said today.

Adjusted group net profit for the first half of the financial year, ending January 25 - before costs associated with exiting Warehouse Extra and Cellars and electricity derivatives - was expected to be similar to last year's figure of $56.8 million.

The outlook remained uncertain as overall consumer spending was expected to remain weak.

Group chief executive Ian Morrice said the company was pleased with the sales figures in the current trading environment, as it continued to lift market share in a highly competitive season.

Effective margin and inventory management and increased direct sourcing, combined with a cost reduction programme, underpinned the performance, Mr Morrice said.

Warehouse Stationery sales were down 9.4 per cent for the 10 weeks, with same store sales down 9 per cent, but Mr Morrice said the key back-to-school selling period was still ahead for that operation.

Operating margins were under pressure but robust cost reduction measures were in place to help offset that.

"We expect there will be further pressure on consumers and we will invest in maintaining our price leadership position to grow market share," Mr Morrice said.

"We aim to manage the recent negative shift in currency rates through further cost-price reductions and continued tight inventory management."

In November, The Warehouse reported that first quarter sales for the period to October 26 were down 2.1 per cent from a year earlier to $366.6m, with a slowdown particularly noted in bigger ticket items.

Shares in The Warehouse closed at $3.48 yesterday, down from $6.15 last February but up from the year low of $3 in October.