Warehouse says first-half profit may fall as much as 15pc as rivalry crimps margins

The Warehouse says profit may fall up to 15 per cent as it contends with a weaker-than-expected run up to Christmas.

Shares in The Warehouse dropped by 30c, or 9.6 per cent, this morning after the company said its performance in the lead up to Christmas had been below expectations.

The stock last traded on the NZX at $2.82 a share.

The retail giant said that while the next few weeks were an important trading period, it was unlikely that the year-to-date shortfall would be fully offset.

It said in a statement the adjusted net profit after tax for the group for the half year ending January 29 was expected to be between 10 to 15 per cent lower than the same period last year.

Adjusted net profit after tax is expected to be between $38.5 million and $41m in the six months ending January 29, 2017, the Auckland-based company said in a statement.

Warehouse will release its complete first-half earnings on March 9, 2017, and provide an update on its strategy and plans to reduce costs, it said.

More than half of the retailer's sales are generated by its general merchandise 'red shed' Warehouse stores and the second quarter of its financial year includes the peak Christmas period and generates most of the group's sales and profit in its first half. The company warned at its annual meeting last month that it would likely write down the value of its financial services business due to weaker-than-expected trading.

"While sales growth has continued at The Warehouse, margin pressure in the face of an increasingly competitive retail environment, combined with a below expectation performance from Financial Services, as previously indicated at the group's annual meeting, are the two main contributors to the lower profit expectations," Warehouse said.

- with BusinessDesk