The Warehouse's full-year trading results today will be keenly anticipated by analysts and investors alike, following its profit downgrade in late June.
A warm winter and poor uptake on sales has left many in the retail sector booking flat or subdued growth, with pared profit margins and higher-than-anticipated stock inventories.
The Warehouse's downgrade of its after-tax profit for its full year to July went from a range of $67 million to $71 million down to $59 million to $62 million, meaning year-ahead financial guidance will be at a premium today for investors.
Noel Leeming, Warehouse Stationery and Financial Services were all performing in line with planned profit expectations, but that was not the case with the Red Sheds and Torpedo7, The Warehouse said at the time of its downgrade.
While Red Sheds were affected by ''unusual and sustained warm temperatures'' during autumn and winter, Red Shed sales were still above last year's.
However, sales of seasonal apparel and home products were below plan and were having to be sold at decreased profit margins to avoid end-of-season overstocking, the company said.
Craigs Investment Partners broker Peter McIntyre expected after-tax profit to come in at the lower end of The Warehouse's June guidance, at about $61 million.
''Investors are going to want to know the strategy for its recent acquisitions and whether they [Warehouse] have got a feel for retail trading in e-space,'' he said of online trading platforms.
He said while the Red Sheds were exposed to seasonal product lines, the timing was unfortunate, given the lack of visibility over its reinvestment and acquisition strategy and the impact of online retail.
''While full-year 2013 had shown positive momentum, full-year 2014 has seen a return to earnings and margin declines,'' Mr McIntyre said.
Forsyth Barr broker Andrew Rooney said The Warehouse was in the third year of a five-year ''major strategic plan''' of reinvestment to ''arrest market share declines at its flagship chain''.
''The downgrade is driven by Red Sheds and Torpedo7, while Blue Sheds and Noel Leeming are tracking in line with expectations,'' Mr Rooney said.
He picked earnings before interest and tax to be down from $111 million to $99.8 million and reported after-tax profit down from $144.7 million a year ago to $67.8 million.
The ''key driver'' of the downgrade was disappointing fourth-quarter sales and profit margins at Red Sheds.
''Red Sheds has been a repeat offender behind recent downgrades, despite significant capital invested in the store base.''
While The Warehouse's substantial shift in focus to online retailing was positive, Mr Rooney was taking a ''cautious stance'' on what might be the earnings potential of recent acquisitions.
