Two of New Zealand's most high-profile retail chains reported contrasting profits yesterday with both The Warehouse and Briscoe Group gaining praise from brokers.
The Warehouse reported an operating profit of $67.9 million for the six months ended January 29, down nearly 14% on the previous corresponding period. Sales were up 3.3% at $937.9 million.
Thanks to a tax bill about $8 million less than last year, the tax-paid profit rose 3.3% to $54 million but the reported profit was down nearly 12% to $46.7 million from $52.9 million in the pcp.
Briscoe Group reported operating earnings of $36.7 million for the 12 months ended January 29, up 12% on the pcp.
Sales were up 4.7% to $438.04 million.
Profit after tax was $27.5 million, up 27.4% on the pcp, or 14.25% compared with last year's adjusted profit which included a one-off tax expense.
The Warehouse will pay an interim dividend of 13.5c per share for the period, and Briscoe will pay a final 6.5c dividend.
Forsyth Barr broker Suzanne Kinnaird said The Warehouse profit was better than expected, mainly due to a better result from the Red Sheds, which was offset by Warehouse Stationery slipping back on last year.
"We think the full-year result should come in at the top of, or even above, the $62 million to $66 million guidance range."
Growth in sales was better than had been seen for some time, indicating the major changes made had been positive, she said.
Net debt was up to nearly $200 million, but would be reduced by a property sale in the second half.
"Overall, the result showed solid progress but whether the significant spending programme being carried out will reignite growth remains a longer-term story."
Commenting on the Briscoe Group profit, Ms Kinnaird said the result was in line with recent guidance of at least $27 million. However, the group's guidance and Forsyth Barr's forecasts had been revised up several times through the previous year, as the company had performed strongly in a difficult environment.
Revenue growth in homeware stores was higher than that achieved by The Warehouse, although the product segments differed. The Warehouse had exposure to apparel, electronics and entertainment - all of which would have been weaker in the six months, she said.
Rebel Sport, part of the Briscoe Group, received a boost from the Rugby World Cup, but even so, the underlying performance of the business was very positive.
"Briscoe continues to do everything right in a tough retail climate and we expect further profit growth next year," she said.
Briscoe chief executive Rod Duke said the record profit had been achieved in a market environment of continued economic uncertainty.
"We do not envisage any significant changes during this year to the overall economic retailing environment, which we forecast will continue to be difficult and volatile. But we are pleased with the start we have made to our financial year and expect to continue to strengthen our position as New Zealand's leading retailer of homeware and sporting goods," he said.
The Warehouse chairman Graham Evans said overall sales growth had been encouraging with the start of an improving same-store sales trend continuing into February.
Margins had held in all major categories except apparel.
Among the highlights mentioned by Mr Evans were the first 10 full-store refits in the rejuvenation strategy starting in February, and two new Warehouse Stationery stores opening, one in South Dunedin and one in Te Awamutu.
Trading conditions were expected to remain uncertain in the remainder of the financial year, he said.
