Warehouse warns 1H earnings to fall by up to 13 percent
By Paul McBeth
Jan. 23 (BusinessDesk) – Budget retailer Warehouse Group is warning its first-half profit will fall by as much as 13
percent after strong Christmas sales failed to compensate for a margin squeeze in the first quarter, higher funding
costs, and reduced rental income.
Adjusted net profit will be between $46 million and $48 million in the first six months of the retailer’s financial
year, to January, from $52.9 million a year earlier, the company said in a statement. Half of the reduction in
first-half earnings was due to increased funding costs as the company reshapes its business and from a reduction in
rental income, it said.
Total sales at the retailer’s ‘Red Sheds’ brand rose 5 percent from last year’s $1.59 billion in the period, with a
recovery in gross profit margins in the second quarter after they shrank in the first quarter.
“We are pleased with how all of our retail brands traded over the critical Christmas period and the trading profit (the
profit delivered by our retail businesses) is likely to be down only 1 to 2 percent in the half, recovering much of the
ground lost in the first quarter,” chief executive Mark Powell said. “This reflects the progress we are making as we
reshape the group, in a retail market that is undergoing significant change.”
Warehouse, which this month bought the Schooltex school uniform brand for $9 million, signalled the downgrade at last
November’s annual meeting, blaming the first-quarter margin squeeze and the company’s investment in new acquisitions and
expanded online presence.
The retailer said it will provide full-year guidance when it announces the first-half result on March 7, and expects the
improvements in the second quarter will continue to flow into the second six months of the financial year. The company
has previously indicated annual adjusted profit will beat last year’s $73.7 million.
The shares fell 1.1 percent to $3.72 in trading yesterday, and have gained 17 percent over the past year. The stock is
rated an average ‘hold’ based on seven analyst recommendations compiled by Reuters, with a median price target of $3.75.
(BusinessDesk)