Warehouse cuts profit forecast, cites consumer `downturn'

Friday 27th June 2008

Warehouse Group, New Zealand's biggest discount chain, cut its full-year profit forecast by about 10%, citing a "marked downturn" in consumer spending.

Profit in the 12 months ended July 27 will be NZ$84 million to NZ$88 million, Warehouse said in a statement. It had previously forecast NZ$94 million to NZ$98 million.

Warehouse follows Briscoe Group, which yesterday cut its first-half profit forecast for the second time in two months amid "extremely difficult" trading conditions. Figures today are expected to show New Zealand's economy shrank in the first quarter as high interest rates and surging food and fuel prices deterred consumers.

"Consumer confidence and retail spending have deteriorated markedly in recent weeks in response to increasing inflationary pressures on fuel and the cost of living," Warehouse said. A downturn in consumer spending since late May "has significantly reduced the company's sales and margin expectations for the remainder of the financial year."

Briscoe, operator of the Briscoes Homewares, Living & Giving, Urban Loft and Rebel Sports stores yesterday cut is first-half earnings forecast to NZ$2 million to NZ$3 million.

Duke cited increases in labour, distribution, and fuel costs and said the company will be taking "significant further actions" to cut costs further in the second half.

Consumer confidence collapsed to a 17-year low in the June quarter, according to a Westpac Banking Corp survey this week.

By Jonathan Underhill

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