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Daily ShareChat: The Warehouse Group

By Jenny Ruth

Tuesday 23rd March 2010

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 Jenny Ruth

The Warehouse Group's guidance for its normalised full-year result to be similar to last year's $85.2 million net profit implies less of a second-half improvement than he had been expecting, says ASB Securities analyst Florian Burch.

He had been forecasting an $87.7 million full-year result and other analysts were expecting between $80.9 million and $89 million.

"Management expect the non-food retail market in which The Warehouse competes to remain difficult and promotionally driven (ie discount plagued) in 2010, though with gradual improvement over the course of the year," Burch says.

"They regard recent improvements in consumer confidence - and the implications thereof for retail sales - as uncertain, particularly because of still high unemployment," he says.

He has updated his forecast in line with management's guidance, factoring in slower progress on the stationery division achieving a benchmark 6% EBIT (earnings before interest and tax) profit margin, tweaking his Red Sheds store opening forecasts and also moderating his previous expectation of the Red Sheds' margin improvement.

"There were no major surprises in the strategy update." The Warehouse has firmed up plans to increase Red Shed store numbers over the next five years and to roll out the stationery stores to nationwide coverage while attempting to grow same-store sales.


ASB Securities Investment rating: marketperform.


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