Retail giant's report much anticipated

The half-year report out tomorrow from retail giant The Warehouse Group is much anticipated by brokers and investors alike after changes to the company structure with the purchase of Noel Leeming.

The share price was up yesterday to close at $3.47 after reaching a high for the day of $3.51, as investors anticipated a good result. In the past six months the shares have traded at a low of $2.68 and a high of $3.56.

Craigs Investment Partners expects operating earnings of $106 million for the six months ending January, up 20% on the previous corresponding period (pcp). The reported profit is forecast to come in at $54.8 million, up 17% on the pcp.

Craigs broker Chris Timms said yesterday the forecast profit increase was driven primarily by sales growth as New Zealand retail sales continued to benefit from a strong housing market, a two-month contribution from the Noel Leeming acquisition and normalisation of apparel margins.

Of interest would be Red Shed operating margins, the store refresh strategy, the performance of Noel Leeming and details on this week's Torpedo7 acquisition, he said.

According to Statistics New Zealand, in the 12 months to December, retail sales in The Warehouse categories grew around 3.5% on the pcp. The group had also opened three Red Sheds and eight Blue Warehouse Stationery stores since the start of the 2012 financial year.

Costs were up significantly in the second half of 2012, largely as a result of The Warehouse investing in staff to improve customer experience, Mr Timms said.

Whether the group could generate sufficient sales to offset that increase remained to be seen.