KEY POINTS:
Retailer The Warehouse Group has posted a 21 per cent fall in annual net profit to $90.8 million, hit by economic slowdown and pressure on household budgets.
The profit for the year to July 27 compared to $114.8m the previous year and was made on group sales down 1.5 per cent to $1.74 billion.
Chairman Keith Smith said the result, while below last year, needed to be viewed in light of the slowdown in economic activity and the financial pressures being brought to bear on New Zealand households, the impact of which had been felt by all retailers.
The company said net profit after tax, excluding unusual items, was down 17 per cent from the previous year to $80.9m.
A final fully imputed dividend of 5.5 cents per share will be paid, bringing the total dividend for the year to 21cps, 3.5cps higher than the previous year.
Chief executive Ian Morrice said uncertainty was likely to be a feature of the New Zealand economy for some time and he expected the retail environment to remain subdued during the next 12 months.
The Warehouse division reported sales down 0.8 per cent to $1.53b, with same store sales down 1.2 per cent. Earnings before interest and tax (ebit) was down 17.5 per cent to $112.7m.
Morrice said the result reflected a difficult trading environment, especially during the latter part of the third quarter and through the fourth quarter.
"A clear shift in consumer sentiment occurred during this period which placed significant pressure on retail sales with margins coming under further pressure as retailers sought to clear seasonal inventories," he said.
"Despite the difficult trading environment customers are continuing to respond positively to product innovation and improved quality."
Gains continued to be achieved on apparel, and the company was pleased with developments in its home decor, pharmacy and health and beauty categories.
During the year six store refits were carried out, including extensions and relocations, while "significant progress" was made towards achieving on-line trading capability, said Morrice.
The company would make a decision by the end of October on the future of its Extra format strategy.
Three Warehouse Extra stores have been developed, but a year ago the company put the development of more such stores on hold to give it time to improve the format.
The rollout of the Extra stores, which has a grocery component, was seen by the Commerce Commission as an important factor in its effort to stop supermarket chains Woolworths and Foodstuffs from mounting full takeover bids for The Warehouse.
Woolworths has sought leave from the Supreme Court to appeal a Court of Appeal decision that prevented the rival grocery chains bidding for The Warehouse.
Morrice said today that The Warehouse had put considerable resource into refining the Extra format model and improving execution in both store operations and supply chain.
"As a result we have seen a measurable increase in customer acceptance and improved financial performance across our three Extra stores," he said.
But the "sales halo" benefits - in which general merchandise sales increase through attracting customers to buy groceries - had not maintained their momentum and were well short of expectations on an annual basis.
At Warehouse Stationery, sales were down 6.6 per cent to $199.5m, with same store sales down 4.5 per cent. Ebit for the year was $5.1m, compared to $9.4m the previous year.
Pressure on discretionary spending had a particularly marked impact on sales of high ticket categories such as computers and furniture, Mr Morrice said.
Shares in The Warehouse closed at $3.21 yesterday, down from a year high of $6.66 last December.
- NZPA
