19 Mar 2019

Profits for The Warehouse on the rise after restructure

11:05 am on 19 March 2019

The Warehouse has made a solid first half profit as it continues to restructure and invest in digital services.

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Photo: Rafael Ben-Ari/Chameleons Eye/ 123rf

The country's largest retailer, which has the Red Sheds, Warehouse Stationery, Noel Leeming and Torpedo7 stores, made a first half net profit of $35.8 million in the six months ended in January, up 13 percent from $31.9m the year earlier.

However, the net result was $39.6m when restructuring costs were excluded.

Full year normalised net profit is tracking to between $63m and $66m, representing year-on-year growth of 7 percent to 12 percent.

Retail sales rose by 2.6 percent to $1.64 billion, reflecting same store sales growth across all its brands.

A 21 percent increase in online sales made up 4.9 percent of the total.

However, Red Shed sales were down slightly over the year earlier, with a 1.4 percent drop in the second quarter of the year, offsetting a 2 percent gain in the first quarter.

The retail gross profit dropped 0.6 percent to $345.4m, but the company expected margins to improve over the next year.

"Although cost of doing business was held for the period, the drop in operating profit was disappointing," chief executive Nick Grayston said.

He expected costs to fall as restructuring of the business continued.

The company managed to reduce debt by 9.5 percent from the year before.

It expected to spend less capital over the full year in a range of $65m to $85m, versus the original guidance of $80m to $100m.

Mr Grayston said the Christmas trading season had been flat across the retail sector, as a colder start to summer impacted seasonal categories, particularly clothing and sporting goods.

"While Christmas remains one of New Zealand's most important family celebration and shopping occasions, we noticed a change in customer shopping trends, particularly around Black Friday sales," he said.

"We had our biggest Black Friday sales ever in November across all our brands and our biggest Boxing Day in Noel Leeming. We are closely monitoring how these trends affect Christmas trading going forward."

The Warehouse will pay an interim dividend of 9 cents a share.

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