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Warehouse chairman sees downturn lasting "for some time"

By Paul McBeth

Friday 28th November 2008

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Keith Smith, chairman of Warehouse Group, expects the current economic slump and weak consumer spending will last “for some time,” according to his presentation to the annual shareholders’ meeting today.

The “first quarter had seen difficult trading conditions” with falling sales in “larger ticket items,” he said. Sales were stronger in apparel, entertainment and consumable items.

“The December and early January months are the most important period of the year,” Smith told shareholders. “Our year-end result is dependent on trading outcomes during this time.”

Profit at Warehouse fell 21% to $90.8 million last year, as slackening demand spurred retailers to cut prices, eroding their margins. Sales fell 1.5% to $1.7 billion. The company cut its forecast profit by 10% in June, citing a marked fall in consumer spending.

The economy fell into recession in the first half of the year and some economists say the contraction may extend into next year. The central bank is expected to slash the official cash rate by 100 basis points to 5.5% next week to revive an economy hurt by a housing slump, rising unemployment and weakening household demand.

The NZX’s index of consumer stocks has tumbled 41% this year.

The company’s stock was unchanged at $3.52 and has tumbled from as high as $6.64 in the past 11 months.

Smith didn’t comment on the failed takeover attempts by Australia’s Woolworths and rival Foodstuffs Cooperative. Last month, Woolworths withdrew its challenge in the Supreme Court to a Commerce Commission decision preventing it from taking over Warehouse. Woolworths and Foodstuffs each have a 10% holding in the retailer.

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