Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


CORRECT: Warehouse says FY earnings to fall, eyes finance

CORRECT: Warehouse says FY earnings to fall as it seeks $115M to expand financial services

(Fixes incorrect reference to buying shares in 6th graph)

By Tina Morrison

March 6 (BusinessDesk) – Warehouse Group expects full-year earnings to fall as it invests in financial services and buys rival retailers to diversify away from its core ‘red shed’ discount stores.

Warehouse expects adjusted full-year profit of $67 million to $71 million, down from $73.7 million last year, the Auckland-based company said today. It posted a 13 percent drop in adjusted first half profit of $46.2 million today, at the bottom end of its $46 million to $48 million forecast.

New Zealand’s largest listed retailer said today it plans to pay $3 million for the Diners Club New Zealand business to beef up its financial services offering, as part of a plan to get half its earnings from areas other than its core ‘Red Sheds’. To reach the target, it is expanding its stationery stores, bought the Noel Leeming entertainment and technology chain and a stake in online outdoor and adventure retailer Torpedo7 Group and is buying school uniform business School Tex.

“We are in an ongoing process of reshaping The Warehouse Group, with each business at a different stage in its journey,” chairman Ted van Arkel said. “Opportunities such as financial services, which has arisen because of our strategy, are exciting and will provide material earnings to the group in the medium term.”

In order to invest in its business to drive future earnings, the company will cut its dividend payout ratio to between 75-85 percent of adjusted profit, from a previous policy of 90 percent of adjusted profit, it said. To provide certainty for shareholder, the policy will be phased in over the next two years when a minimum dividend of 19 cents per share will be paid.

Shares in Warehouse last traded at $3.61 and are in a trading halt as the company seeks to raise $115 million to strengthen its capital base to support its financial services strategy. It plans to sell $100 million of shares at $3.23 apiece to institutional shareholders today. It also plans to sell $15 million of shares to New Zealand resident shareholders.

Warehouse founder Stephen Tindall and his Tindall Foundation, which together own about half the shares in the company, will participate in the equity raising to maintain their existing stakes.

The company expects its financial services business to lose as much as $3 million after tax in the 2014 and 2015 financial years as the business is developed, and contribute to earnings from the 2016 financial year.

Warehouse is following retailers including Target Corp and Tesco as it aims to boost earnings from selling financial services and help the estimated 1.5 million people who come through its doors every year buy more products.

It expects to have $600 million of receivables by the 2020 financial year. The company currently generates about $400 million of receivables for third parties and its joint venture.

Warehouse’s core red shed discount stores, which make up more than two thirds of its sales, boosted first-half revenue 6.2 percent to $920.1 million. The unit’s same-store sales rose 4.1 percent and marked 12 consecutive quarters of positive same-store sales growth.

Chief executive Mark Powell said he expects the red sheds to continue to produce a 3 to 4 percent growth rate in same store sales over the medium term.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Speaking For The Bees: Greens Call For Neonicotinoid Pesticide Ban

The National Government should ban the use of controversial pesticides called neonicotinoids after evidence has revealed that even at low doses they cause harm to bee populations, the Green Party said today. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news