Warehouse results below expectations

Sales at The Warehouse's red sheds were flat during first-half trading. Pictured: the South Dunedin outlet. Photo: Linda Robertson
Sales at The Warehouse's red sheds were flat during first-half trading. Pictured: the South Dunedin outlet. Photo: Linda Robertson
The Warehouse's half-year result was below analysts' expectations as recurring restructuring costs detracted from the bottom line.

For the half to January, The Warehouse Group group sales rose 2.7% to $1.64billion; earnings before interest and tax (ebit) was up 3.5% to $60.5million; and adjusted after-tax profit rose 5.2% to $39.6million.

Craigs Investment Partners broker Peter McIntyre said he had expected a better result, noting the company had said Christmas was a ''tough trading period''.

''The Warehouse continues to report an adjusted net profit after tax to adjust for restructuring costs that occur every year,'' Mr McIntyre said.

For the first half those costs were around $3million, with a further $10million to $12million expected in second-half trading, he said.

''These [costs] appear to be business-as-usual costs for retailers these days.''

Forsyth Barr broker Suzanne Kinnaird said the result was ''below expectations'', with the costs of doing business increasing, meaning there was no ebit margin gains.

''The Warehouse noted a challenging environment with areas of weakness being apparel and technology,'' she said.

The Warehouse sales were flat, down 0.6% to $345.4million, Warehouse Stationery was up 3% $132.8million sales, Noel Leeming was up 7.4% $487.3million and Torpedo 7 Group rose by 1.5%, or $89.9million, although the latter booked a $1.8million loss.

Online sales increased, making up 7.7% of sales across the group.

Net debt was down 9.5%, or by $16.1million, to $153.1million.

Warehouse chairwoman Joan Withers said the result reflected a ''promising start'' to the full year, especially given the challenging Christmas period.

She said the ''transformation programme'' was making good progress.

''We still have a large job in front of us but we are on track.''

Chief executive Nick Grayston said the improved result was despite a flat Christmas and New Year trading period, BusinessDesk reported.

''While Christmas remains one of New Zealand's most important family celebration and shopping occasions, we noticed a change in customer shopping trends, particularly around Black Friday sales,'' he said in a statement.

''We had our biggest Black Friday sales ever in November across all our brands and our biggest Boxing Day in Noel Leeming.

''We are closely monitoring how these trends affect Christmas trading going forward.''

The company noted a flat Christmas trading period for the wider retail sector, while a cold start to November and December had affected sales
of apparel, sporting and
cooling goods.

It also acknowledged the looming entrance of Ikea as demonstrating ''continuing disruption in our market and opportunities others see in New Zealand.''

- Additional reporting: BusinessDesk

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