Warehouse says first-half profit may fall as much as 15% as rivalry crimps margins

Tuesday 20th December 2016

Warehouse Group says profit may fall between 10 and 15 percent in its first half its financial year as New Zealand's largest publicly listed retailer contends with a weaker-than-expected run up to Christmas both at its stores and its financial services business.

Adjusted net profit after tax is expected to be between $38.5 million and $41 million in the six months ending Jan. 29, 2017, the Auckland-based company said in a statement. Warehouse will release its complete first-half earnings on March 9, 2017, and provide an update on its strategy and plans to reduce costs, it said.

More than half of the retailer's sales are generated by its general merchandise 'red shed' Warehouse stores and the second quarter of its financial year includes the peak Christmas period and generates most of the group's sales and profit in its first half. The company warned at its annual meeting last month that it would likely write down the value of its financial services business due to weaker-than-expected trading.

"While sales growth has continued at The Warehouse, margin pressure in the face of an increasingly competitive retail environment, combined with a below expectation performance from Financial Services, as previously indicated at the group’s annual meeting, are the two main contributors to the lower profit expectations," Warehouse said.

Warehouse shares last traded at $3.12, and have gained 17 percent this year.

BusinessDesk.co.nz

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