Warehouse reiterates profit growth to stall this year

Wednesday 22nd April 2009

Warehouse Group, the biggest retailer on the NZX 50 Index, has reiterated its forecast that profit growth will stall this year, following a 24% fall in half-year profit. In its first-half report, the retailer repeated the forecast first made with its interim results on March 12 that adjusted net profit for the full year will be similar to last year’s $80.9 million.

The shares held at $3.54 in trading today, having slumped more than 40% in the past 12 months. Profit tumbled to $49 million in the six months ended January 25, from $64.3 million a year earlier.

“So long as the prospect of high unemployment and low consumer confidence remains, the retail environment will continue to be challenging and retail spending under pressure,” the company said in the report’s outlook statement. “The changes we are making in response to the recession have enabled us to compete vigorously whilst maintaining margins.”

The fall in its half-year profit reflect the $7.4 million cost of decommissioning its Extra hypermarket stores and Cellar liquor outlets after the company abandoned its venture into fresh food and alcohol. The retailer decreased its net debt by a third to $76.4 million.

The company is seeking to reduce costs by $30 million over the next three years by boosting productivity and cutting labour costs in an initiative called Project Invigorate.

Based on the roll-out of the plan in Christchurch, the National Distribution Union estimates the project will see the reduction of 600 full-time equivalent positions within the group.

Warehouse chief financial officer Luke Blunt told the Press newspaper that the project may not necessarily result in redundancies, but could see staff paid for fewer hours. He also said the company would make an announcement if there were going to be significant job losses.

Businesswire.co.nz

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