Retailer The Warehouse has tentatively said it expects to
beat last year's adjusted after-tax profit of $65.2 million,
but remains highly cautionary over crucial January sales and
overall economic conditions.
Chairman Graham Evans told shareholders at the annual meeting
yesterday that during the past 12 months underlying non-food
retail sales had continued to show signs of gradual
improvement, but the extent of that growth for the year ahead
"Although New Zealand's general economic outlook supports
strengthening consumer confidence, a number of factors, both
domestic and international, point to ongoing uncertainty and
volatility," he said.
Craigs Investment Partners broker Peter McIntyre said The
Warehouse was becoming "more aggressive" in adapting to the
changing retail environment, in developing its online
presence and dropping non-performing brands and replacing
"If a product is not delivering, The Warehouse is prepared to
forgo a brand and get another elsewhere," he said.
The Warehouse expected a gradual improvement in New Zealand
retail sales, but uncertainty in both domestic and global
economies meant the extent of underlying growth remained
unclear, Mr McIntyre said.
Forsyth Barr broker Tom Bliss said the refitted stores were
beginning to show early indications of positive results, as
same-store sales were up 3% "We're encouraged by the early
positive signs from its reinvestment and revitalisation at
its flagship chain, but we believe investors are likely to
remain cautious until evidence of improving profits begins to
emerge," Mr Bliss said.
While not giving further specific earnings guidance
yesterday, Mr Evans said guidance would be updated in March
when the half-year result was reported.
In the near term, earnings would be "significantly
influenced" by trading performance over the critical January
quarter, but the board had assessed that adjusted earnings
for full-year 2013 "are likely to be higher than that
achieved in full-year 2012", Mr Evans said.
In early September, The Warehouse reported a 15% increase in
annual after-tax profit of $89.8 million, but that was
boosted by a total of $25.4 million in one-off gains from
property sales and the release of warrant provisions.
Without the one-off gains, The Warehouse's adjusted profit
was booked at $65.2 million, in line with earlier guidance of
$62 million to $66 million, but was 14% down on last year's
profitMr Evans expected The Warehouse group to continue its
"strong cash-flow performance", which would allow the company
to retain the current dividend payout ratio of 90% and to
fund its future capital requirements from existing
Mr McIntyre noted that within the store refit programme, 13
had been completed since February and 16 more outlets were
expected to be completed in the second half of 2013.
Mr McIntyre said The Warehouse had "an easy win", in that its
apparel division performed particularly badly in full-year
2012, excess inventory having to be cleared with significant
"We understand that apparel is trading ahead of last year and
that inventories are in much better shape than the previous
corresponding period," he said.