Warehouse shares slide after profit hit

Last updated 15:04 20/06/2014

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Shares in The Warehouse Group slid to an 18-month low after the major budget retailer downgraded its full-year profit guidance.

The firm's shares fell 24c to $3.08 after it said lower than expected sales at its core "red sheds" stores and online sports store Torpedo7 had forced it to downgrade its annual net profit by 12 per cent.

Overall sales at the red sheds were higher than last year's but warm weather had hit its clothing and winter homeware sales targets hard, and it was unlikely to retrieve full margins by the end of the season.

The Warehouse now expected adjusted annual net profit of between $59 million and $62m for the year to July, down from March guidance of between $67m and $71m. It was also below last year's adjusted profit of $73.7m.

Chairman Ted Van Arkel said the group's attempt to integrate its R&R Sport, No.1 Fitness and supplements website Shotgun.co.nz into Torpedo7 had been "well managed", but the new entity had fallen short of its short-term sales targets.

Weather records from Niwa shows despite a cold snap at the end of May, last month's temperatures were abnormally high for much of the South Island and lower half of the North Island.

Mean temperatures in those regions were up to 1.2 deg C above average, with near-normal temperatures elsewhere.

Forsyth Barr analyst Chelsea Leadbetter said it was "definitely a warmer than usual winter" and she was unsurprised that it had hurt The Warehouse's clothing and heater sales.

Apparel sales data was generally "pretty tough". However, she was concerned about Torpedo7, which was an area The Warehouse had wanted to grow.

"It's hard to tell whether it's just a seasonal blip."

The group's Noel Leeming, Warehouse Stationery and financial services arms were all performing to plan.

Van Arkel said the reshaped The Warehouse Group had a stronger base and significant opportunities for growth.  

"In the next year the focus will be on consolidating the changes made and leveraging profitable growth." 

- This story has been corrected

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