WHS profits despite tough Aussie market

By Phil Boeyen, ShareChat Business News Editor

Monday 12th March 2001

Tough times in the Australian retail sector are taking their toll on The Warehouse (NZSE: WHS) although the company continues to lift its game in New Zealand.

For the six months ended January the retailer made a group profit of $51.95 million, a rise of 7.7% compared with the previous year. Excluding one-off gains, the profit result is 9.3% above last year's $48.4 million figure.

But while total profit rose, group profit margin fell from 8% last year to 5.7%, reflecting a net loss of $507,000 in its Australian operations.

Total group operating earnings before interest, goodwill amortisation, abnormals and taxation rose nearly 23% to $92.4 million, but once again it's the margins that tell the tale.

In New Zealand group operating margins fell from 12.5% to 12.2%, primarily from higher paper prices, lower-margin business machine sales and additional infrastructure investment at the Warehouse Stationery chain.

In Australia the group operating margin was just 4.1%.

The company says Clint's and Solly's experienced a proportionately greater margin contraction in the last six months with Australian consumers unsettled by the introduction of GST, higher fuel prices, a lower Australian dollar and the disruption caused by the Sydney Olympics.

"Disruption arising from the ownership transition also contributed to a weaker than hoped for first half," the company says in a statement.

Since balance date the company says its New Zealand operation has been trading well with February sales up 22% after adjusting for an extra trading day last year, and same-store sales up nearly 9%.

In Australia the adjusted sales figure for February rose 4% on last year and the company says its business there is continuing to reflect the tighter retail trading conditions.

At the end of January WHS was also carrying considerably more inventory than the previous interim period, up by $125 million.

While the $44 million increase in inventory in New Zealand is attributed to additional stock because of an increase in retail floor space, the company says Australia's $81 million inventory figure is $10 million higher than forecast.

"The rapid roll-out of "Warehouse style" stores planned for the rest of the year should allow us to effectively manage this stock down," it says.

The Warehouse has announced a dividend of 8.5 cents per share, which it says is consistent with paying out 50% of tax-paid profits to investors.

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