Warehouse fattens margins, pays special dividend

Friday 11th September 2009

Warehouse Group, the biggest retailer on the NZX 50 Index, posted earnings before one-time items that beat estimates after fattening the profit margin at its department stores. The company will pay a special dividend of 10 cents a share.

Profit before unusual items rose to $85.2 million in the 53 weeks ended August 2, from $80.9 million a year earlier, the Auckland-based company said in a statement. Net profit fell 15% to $76.8 million, or 24.9 cents a share,reflecting a $7.4 million charge to exit fresh food and liquor.

“Our focus on gross margin, inventory management and cost reduction underpinned the profit outcome and strong operating cash flows,” chief executive Ian Morrice said. The profit was “a good result” in “a very difficult trading environment.”

Warehouse’s profit margin for its Red Sheds widened to 7.9% from 7.4%. the group’s overall profit margin narrowed by 70 basis points to 4.5% on a slump in profitability at its Warehouse Stationery outlets. Total sales fell 0.8% to $1.72 billion.

The retailer kept its final dividend unchanged at 5.5 cents in additional to the special dividend.

Chairman Keith Smith gave no guidance for the current year, saying “consumer spending is expected to gradually improve over the next 12 months but uncertainty remains as to whether the present upturn will be sustained.”

Warehouse will give a sales update for the first quarter of 2010 on November 1. Sales at the Red Sheds rose 2.4% in the second half of the latest year, or 1.6% on a same-store basis, an improvement from the first half of the year.

At Warehouse Stationery, full-year operating profit tumbled 69% to $1.6 million, reflecting the impact of the recession on big-ticket items such as office furniture and technology products, it said. Second-half sales fell 4%, or 6.4% for stores open at least 12 months.

Warehouse strengthened its balance sheet in the latest year. Net debt dropped to $47.2 million from $139.6 million and gearing reduced to 12.8% from 29.4%.

Shares of Warehouse were unchanged at $4.04 yesterday and have gained about 16% this year.

Businesswire.co.nz

Comments from our readers

No comments yet