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Tighter retail margins cut into Big Red retailer The Warehouse's earnings for the six months ended January 26, company reports released yesterday show.
Sales in the period were $1.42 billion, up nearly 30% on the $1.1 billion reported in the previous corresponding period. However, the operating profit fell 9% to $70.1 million from $76.9 million in the pcp.
An interim dividend of 13c per share will be paid.
The Warehouse's Red Sheds were the main cause of the fall with earnings falling 7.8% in the period to $60.6 million.
Sales in the stationery chain rose 28% to $4.7 million, Noel Leeming sales were up 20% to $6.8 million and Torpedo7, included for the first time, reported earnings of $742,000.
Other group operations reported a loss of $2.8 million compared with a profit of $1.8 million in the pcp.
Last year's earnings before interest and tax were helped by a $63 million gain on the disposal of property. This year, the company received only $9.2 million from the sale of property which saw ebit fall 39% to $85.1 million.
The profit attributable to shareholders fell 45% to $58.7 million and the adjusted profit fell 12.5% to $46.2 million.
The operating margin of the Red Sheds fell 1% to 6.6%, Noel Leeming's margin fell 2.7% to 2.1% and Warehouse Stationery rose 0.6% to 3.9%. Overall group margin fell 2.1% to 4.9%.
Group managing director Mark Powell said the Red Sheds' reported sales for the first half were $920.1 millon, an increase of 6.2%, or $53.5 million.
''The Red Sheds have now recorded 12 quarters of positive same store sales. It has been at least a decade since the Red Sheds grew same store sales more than 4% in a half and had 12 quarters of consecutive growth. It is still early days but we are pleased with the progress to date.''
The major drivers of sales growth in the half were the continuing sales growth in the Auckland market and double-digit sales growth in womenswear, menswear, health and beauty, jewellery, consumer electronics, gaming, small appliances and whiteware.
Actions taken to improve products, prices and promotions and store environment, and investment in staff, had started bringing customers back to The Warehouse, Mr Powell said.
The group had been reshaped over the past two years.
In a separate announcement, The Warehouse Group announced its intention to add a ''distinct strategic priority'' to be a leading New Zealand financial services company, he said.