The Warehouse has reported a decline in half-year profit, as expected and largely due to a $7.4 million writeoff from exiting a trial Auckland hypermarket, but remains on track to deliver a "similar" adjusted full-year after-tax profit of about $90 million.
For its half-year result to the end of January released yesterday, The Warehouse Group saw earnings before interest and tax down 19.2% from $92.2 million last year to $74.5 million, while after-tax profit declined 23.8% from $64.3 million to $49 million, which included the $7.4 million writeoff, ABN Amro Craigs broker Peter McIntyre said yesterday.
"For investors, it is a heartening result in what [are] tough trading conditions at present."
Warehouse shares opened at $3.52 yesterday and, in an unusual turn of events, none were traded until noon.
The shares closed down almost 2%, or 7c, at $3.45, on a light volume of about 330,000.
Forsyth Barr broker Suzanne Kinnaird said the $49 million result was "in line with our forecast and Warehouse guidance, with the Red Shed's result slightly better than expected but Blue Shed stationery worse.
"Overall, it was a very solid result in the current retail climate, with margins in Red Sheds actually slightly higher in the first half, unlike most other listed retailers," she said.
While The Warehouse was cautious on outlook for its retail sales, it was confident of maintaining gross margins, Ms Kinnaird said.
"They are continuing to make cost and sales-mix improvements, which is offsetting the fall in sales."
Mr McIntyre said the repeat of last year's 15.5c per share dividend was also good news for investors, as increasing margin pressures were seeing dividends of other companies in decline.
He noted, however, that The Warehouse had passed its growth period and must be seen to be trading as a "mature" company delivering reliable dividends.
He still saw the potential in the year ahead for a takeover of the company by founder Stephen Tindall, Woolworths or Foodstuffs, who have respectively 52%, 10% and 10% stakes in The Warehouse.
Coincidentally, the Australian Financial Review yesterday reported Woolworths had $A4 billion ($NZ5.2 billion) to spend on acquisitions and was looking at a variety of options from "greenfield" new developments through to land-banking options.
Mr McIntyre said the 8000-employee Warehouse Group had 85 The Warehouse stores and 45 Warehouse Stationery stores around New Zealand.
Its multitude of locations made it attractive to corporates which could not replicate the coverage.
Warehouse sales for the half-year were $923.5 million, down almost 3% on the corresponding time last year, and while The Warehouse guidance was positive considering conditions, Mr McIntyre cautioned rising unemployment could yet impact negatively on profit.
Briscoe Group's full-year report is expected on Monday.
Profits are expected to be down more than 45% on last year.
Hallenstein Glasson's half-year report is due on March 27, and is expected to show a 40% profit decline.
