Powell aims to reverse slow decline at Warehouse

Friday 16th September 2011 1 Comment

Warehouse Group chief executive Mark Powell says he is aiming to reverse a seven-year decline in same-store sales at the company’s discount outlets in the face of an uncertain retail sector that has seen margins shrink.

New Zealand’s biggest listed retailer today posted an 8.9% decline in full-year earnings before unusual items to $76 million and said profit may fall again in 2012 as it spends more to revamp its outlets and copes with rising costs including insurance in the wake of the Canterbury earthquakes.

Warehouse’s operating margin shrank to 6.8% in the 12 months ended July 31 from 7.4% a year earlier. The company is paying 22 cents in dividends this year, down from 24 cents in 2010. The shares fell 2.3% to $3.37 on the NZX today and are down 1.1% this year, marginally better than the NZX 50 Index’s 1.4% decline.

“We’d describe the outlook as uncertain,” Powell told BusinessDesk. “We’ve taken a fairly neutral assumption about the New Zealand economy – not any great help to us or that negative.”

New Zealand consumer confidence fell from a seven-month high in September, based on the ANZ-Roy Morgan Consumer Confidence measure out today, which fell 0.7 points to 112.6. A net 19% of respondents said they were worse off than a year ago, an improvement from the net 21% feeling worse off in last months survey.

Powell, the former head of the company’s Warehouse Stationary unit, has held the top job for four months. The former coal mine manager from Wales worked for Wal-Mart Stores and Tesco before migrating to New Zealand in 2002.

The retailer is spending $430 million over five years on its stores, with 63 of them, or 75%, having been given a spruce up already.

Warehouse said profit before items in 2012 may slip to $70 million, with net profit of about $80 million. The adjusted figure includes spending on its stores while net profit would be helped by a gain from the sale of assets, Powell said.

Warehouse ‘Red Shed’ department stores had annual sales of $1.46 billion, down 0.9%. Same store sales also rose 0.9%. Operating earnings fell 12% to $112.7 million.

Warehouse Stationery sales rose 4.1% to $201.5 million while same-store sales gained 4.6%. Operating profit at the stationery stores rose to $10.1 million from $8 million a year earlier, when it recognised $1.2 million of charges for restructuring distribution.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 16 September 2011 at 8:31 pm Arty said:

Wonder if returning to the core business model that we consumers supported and liked would lift sales. The Warehouse tried to become a George Courts / Farmers style business, which is not how it grew to the monster machine it is today. Crazy to have atempted the change in my view.