Group chief executive Nick Grayston signalled expectations of a further decline in second-half trading, and a 10% to 15% fall in full-year after-tax profit, down to a range of $54 million to $58 million.
Last month, The Warehouse announced a restructuring, and the loss of 130 jobs, which is expected to save between $15 million and $20 million.
Mr Grayston said a ''weak performance'' in The Warehouse's core ''Red Sheds'' business, coupled with a larger year-on-year loss in Financial Services, was only partially offset by the strong results from the Noel Leeming outlets.
''The mixed first-half performance emphasises the need for the business to accelerate change, and execute on the retailing fundamentals with precision to restore sustainable profitable growth,'' he said in a statement.
While revenue increased 3.4% from $1.56 billion to $1.62 billion, earnings before interest and tax decreased 11.4%, from $73.1 million to $64.7 million, for the six months to January
The Warehouse's after-tax profit was down 76%, from $57.2 million last year to $13.6 million.
An interim dividend of 10c was announced, with a targeted full-year dividend of 15c. Warehouse shares sank 3.3%, to $2.57, after the announcement.
On the restructuring, Mr Grayston said the new operating model would drive greater operational synergies, particularly in the Red and Blue sheds, and increase the focus on e-commerce and digital capabilities.
In the half-year result the group had recognised significant one-off costs in the reported result from the group operating model changes, of $4 million and the full non-cash impairment of goodwill relating to earlier Financial Services acquisitions, of $22.7 million.
Forsyth Barr broker Suzanne Kinnaird said the result from Financial Services was''the key division to disappoint'', with a materially larger $4.2 million loss of earnings before interest and tax (ebit) than the previous year
''The weak result reflects costs associated with the migration of the Westpac joint venture book,'' she said.
Break-even had now been pushed out to full-year 2021, having previously been mid-2018, she said.
Craigs Investment Partners broker Peter McIntyre said while Financial Services had the greatest impact, there was increasing competition to deal with, and also speculation online shopping giant Amazon would be coming to New Zealand.
''They're finding their retail space a very competitive place to be in,'' Mr McIntyre said.
He said the result was within guidance issued in late December, and shareholder response yesterday was relatively muted.
The ''key positive'' for Mrs Kinnaird was the Noel Leeming division, whose ebit was more than 44% higher than the previous year, at $9.2 million, reflecting almost 10% same store growth and tighter cost controls.
The company said the Financial Services business reported an operating loss of $5.2 million. This had increased from $2.7 million the previous year, which was a period when the company was still in pre-launch for a time.
Mr Grayston said, following a detailed review of the business by the Financial Services Board, a non-cash impairment of goodwill of $22.7 million was recognised in the reported result.
''This reflects the difficulties of an early stage business with developing cash flows,'' he said.
The Warehouse's ''Red Sheds'' reported sales up 0.2% to $975.1 million, up $2 million on last year, while ebit for the half was down by $6 million, or 9.1%, to $59.5 million.
Mrs Kinnaird said the Red Sheds' 9.1% decline in ebit reflected a compression on profit margins, driven by currency headwinds, pricing and heightened promotions in seasonal categories.
Mr Grayston's outlook said retail conditions remained ''generally favourable,'' albeit there were signs retail spending was softening.
Headwinds for second-half trading were the continued increased competition and the execution risk concerning The Warehouse's strategic change, both internally in the restructuring and with customers, Mr Grayston said.
He said further restructuring charges would be recognised on the balance sheet in the second half as the changes to the group operating model were implemented.
