Warehouse profit slips

Warehouse profit slips

The Warehouse Group's profit has fallen in what the CEO says has been a difficult trading environment for retailers.

The Warehouse Group announced a $83.2 million adjusted net profit after tax, down 2.4 percent from last year. After deducting a $22.8 million accounting item relating to government tax charges, the net profit after tax for the year ended August 1 was $60.2 million, down 21.6 percent from $76.8 million in 2009.

The Warehouse's earnings before interest and tax were $112.7 million, down 6.3 percent on last year.

The company reported group sales for the year were $1.48 billion, down 3.6 percent on the previous year, though it noted the 2010 financial year was a 52 week trading period, compared to 53 weeks in 2009.

When adjusted, sales were down 1.4 percent and same store sales were down 2.2 percent.

Group chief executive Ian Morrice said the company was faced with a difficult trading environment for retailers with recovery in overall consumption remaining subdued and patchy.

"One important contributing factor impacting our overall sales and market share performance was an estimated decline of 15 percent in the music and DVD market, as consumers continue to move to the on-line environment.

"Although our share of the sector has increased our music and DVD sales fell by over $13 million in the last year. Adjusting for the impact of this decline in music and DVDs, overall sales were relatively flat when compared to the same trading period last year," he says.

Morrice said though he is optimistic about the New Zealand economy in the medium and longer term, the company expected trading conditions to remain difficult for a period of time, and the company would be focusing on reinforcing its strong price and value position.

Warehouse Stationery reported sales up 3.4 percent at $139.6 million on last year, while after adjusting for trading week differences, sales were up 5.4 percent with same store sales up 7.8 percent for the year.

Despite the fall in numbers, chairman Keith Smith said "the 2010 year once again demonstrated the company's resilience in difficult times with the group continuing to deliver consistent earnings and strong cash flows".

As a sign of confidence, The Warehouse said it had reviewed its dividend policy and lifted the payout ratio from 75 percent to 90 percent of adjusted net profit.

"Lifting the company's payout ratio was a key factor in achieving our stated aim of providing superior returns for shareholders over the long term," says Smith.

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