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Warehouse profit falls 21%

Friday 12th September 2008

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Warehouse Group, the biggest retailer on the NZX 50 Index, said full-year profit fell 21% amid weakening consumer demand and higher costs.

Profit fell to NZ$90.8 million, or 29.4 cents in the 12 months ended July 27, from NZ$114.8 million, or 37.5 cents, a year earlier, the company said in a statement. Sales fell 1.5% to NZ$1.7 billion.

Earnings are marginally ahead of the NZ$84 million to NZ$88 million range the company predicted in June. Since then, the central bank has cut interest rates twice to help revive an economy that's probably fallen into recession. It is "too early" to provide earnings guidance for 2009 though retail sales likely will remain subdued, the company said.

"This result reflects a very difficult trading environment especially during the latter part of the third quarter and through quarter four," said chief executive Ian Morrice. "A clear shift in consumer sentiment occurred during this period which placed significant pressure on retail sales with margins coming under further pressure as retailers sought to clear seasonal inventories."

The shares traded at NZ$3.21 yesterday and have declined 44% this year. The slide in the shares is mirrored in rival retailers also. Briscoe Group Ltd. has declined about 35% this year, while the NZX 50 is down about 17%.

The company is reviewing the future of its three Extra hypermarkets after the addition of groceries lifted sales less than expected, Morrice said. A decision on the strategy will be completed by the end of October, he said.

Warehouse Stationery sales fell 6.6% to NZ$199.5 million with same store sales down 4.5%. Earnings before interest and tax for the year fell to NZ$5.1 million from $9.4 million.

Warehouse will pay a final dividend of 5.5 cents a share bringing the total dividend for the year to 21 cents, up 20.0% from the previous year.

By Jonathan Underhill

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