Warehouse sees profit rising

NICK KRAUSE
Last updated 13:44 07/09/2012
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Financial Results

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NZX-listed retailer The Warehouse Group expects the next financial year will bring mixed trading conditions but it is confident it will deliver a stronger profit than this year.

The group today reported adjusted net profit of $65.1m, down from $76m last year but in line with the company's guidance.

The adjusted profit figure excludes sales of property made during the year as well as the release of $7.3m in warranty provisions relating to the sale of the Australian business in 2005.

The company sold a distribution centre in Auckland and a store in Invercargill for a pre-tax profit of $18.2m.

Including these items the group made a net profit for the year to July of $89.9m, up 15.4 per cent on last year.

However group sales for the year were up 3.9 per cent to $1.73 billion, the highest level of growth in eight years. The group's second half was particularly strong, with sales up 4.5 per cent to $794.2m.

Group CEO Mark Powell said it was down to same store sales growth of 2.6 per cent. "Margin percentage was slightly higher than last year so we didn't give away margin to get that sales growth," he said.

The sales growth came from a mixture of basket size and transaction growth, he said. "The transaction growth is really critical because that's telling you more people are coming in your stores."

The Warehouse, or Red Sheds, reported total annual sales of $1.5b, up 4.2 per cent with second half sales rising 5.1 per cent to $688.4m.

However operating profit of $80.9m fell from $98.8m last year or 18.1 per cent. Powell said this was in line with expectations and attributable to investment towards its strategic plan which kicked in 15 months ago to reverse a decline in sales.

The strategy includes reinvigorating the brand, store rejuvenation, category strategy and building its multi-channel offerings. It will spend $130m, mostly on its stores, over three years.

"(We're) making up for under-investment in the past through investment in stores, investment in the number of people in our stores and in inventory," said Powell.

"That was the key driver of why our profit in 2012 was lower than the previous year. Now we've got a base to build on to go forward.'

Warehouse Stationery, the Blue Sheds, reported sales for the year of $206.6m, up 2.6 per cent on last year. Second half sales rose 3 per cent to 106.5m. Its operating profit of $9.8m was down on the $10.1m reported last year.

The group's online business grew 63 per cent off what it concedes is a low base. The company does not reveal its online sales figures but Powell did say it had grown from having equivalent sales of a small Red Shed to a medium-sized one.

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Powell said the company was cautiously optimistic. "We've got Christmas coming up, there is a good sense of positive momentum building in the business but it's still early days."

The company announced a final dividend of 6.5 cents a share, the same as the year before, bringing the total dividend for the year to 20cps. It will be paid on November 14 for shareholders on the register on November 2.

- © Fairfax NZ News

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