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Several aspects of its business-wide restructuring, "every day low price" programme has blunted revenue, as old stock is cleared in sales, meaning profit margins are squeezed.
For its half year to January, The Warehouse group had revenue decline 0.9% from $1.61 billion to $1.59 billion, earnings before interest and tax declined 16.5% from $69.9 million to $58.4 million and reported after-tax profit slipped 15.9% from $44.8 million to $37.7 million.
However, the profit fall beat earlier Warehouse guidance and was up on analysts' expectations.
Warehouse chairwoman Joan Withers said the primary focus during the first half was to "relentlessly" trade the peak retail season, while also focusing on the ambitious transformation agenda.
"With a strong team now in place, and support from external experts, we are confident that we can successfully execute our next major change agenda in 2018 to drive improved performance," Ms Withers said.
She said the board expected the second-half trading to be similar to last year, and adjusted after-tax profit for the year to decline by 22% to 25%, to between $50 million and $53 million.
Warehouse shares, down more than 21% on a year ago, were unchanged at $2.02 after yesterday's announcement.
Forsyth Barr broker Suzanne Kinnaird said the company's core Red Sheds' earnings before interest and tax was down 18% on a year ago and same store sales fell 3.7%, both of which outweighed 6.7% volume growth.
Mrs Kinnaird said the transition to the every day low price programme led to increased clearance sales and lower average prices.
"While we see opportunities for efficiency gains, we're concerned broader structural headwinds will offset any gains," she said.
Ms Withers said Red Sheds' reported sales of $940.1 million, down as expected, was due to the transition in pricing and product strategy resulting in a reduction in average selling price.
"It's expected that the net cash gross profit percentage will improve and more than offset the decline in average selling price now that the clearance of discontinued ranges has been completed," Ms Withers said.
Mrs Kinnaird said: "In the short term we also retain a cautious view on the time to see results and associated costs."
Noel Leeming's reported sales were up 7.5% on a year ago to $453.9 million for the half, and same store sales increased by 5.1%.
Ms Withers said cellular and portable audio were standout categories for Noel Leeming and the business experienced gains across all but the TV product categories, which were similar to last year.