Red sheds' net profit drop

Demonstrating the extent of the tough retail environment, the country’s largest retailer, The Warehouse, has seen its half-year net profit fall 9% over the key Christmas trading months.

Results for the six months to January 30, released this morning, reveal net profit fell 5 million or 8.9% to $52.3 million compared with the same time last year. Sales fell $11 million to $908 million.

The retail giant had earlier cut its profit forecast for the half, following weak Christmas and New Year sales.

Warehouse chairman Keith Smith said the retail sector was experiencing an extended cyclical downturn as a result of continued economic uncertainty.

“The difficult trading environment has added to the challenge of implementing initiatives to offset the impact of price deflation and ongoing decline in some key categories.

“As such the board views the result as satisfactory under the circumstances and is pleased that the company continues to generate solid operating cash flows and remains in a strong financial position”.

Full-year net profit is forecast to be between $76 million and $80 million.

Outgoing chief executive Ian Morrice said the tough trading environment and a higher New Zealand dollar resulted in increased discounting and price deflation across the market.

Although gross margins had been maintained, lower sales overall has translated into lower earnings for the half-year, he said.



“Although the decline in CDs, DVDs and consumer electronics resulted in a sales shortfall we are pleased with progress on a number of fronts. For example, our sporting business was up 4.6%, our home appliance business was up 4.0%, our housewares business up 2.5% and furniture was up over 9%. Other areas of focus such as everyday needs and health and beauty were also significantly up on last year.”

A stronger half for the Warehouse Stationery saw operating profit rise 21.7% to $3.7 million on sales of 98.1 million – up 2%.

The Warehouse

Six months to January 30

                    2011                2010

Revenue:  $908 m             $919
Net profit:  $52 million       $57 million
Dividend:  15.5 cps payable April 20