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

 


Warehouse shares touch 18-month low as stock downgraded

Warehouse shares touch 18-month low as stock downgraded to 'hold' at Craigs

By Tina Morrison

June 24 (BusinessDesk) - Shares in Warehouse Group touched an 18-month low as the stock was downgraded to 'hold' from 'buy' by brokerage Craigs Investment Partners after the retailer cut its full-year earnings forecast, saying it was having to discount winter clothing and homewares because of warmer weather.

Craigs analyst Chris Byrne cut his forecast for the retailer's 2014 profit by 12 percent, the 2015 forecast by 6 percent and the 2016 estimate by 5 percent after Warehouse on Friday said its profit would decline from the year earlier and be lower than previously forecast as it cut profit margins at its 'red sheds' stores to move stock. Apparel makes up about a quarter of 'red shed' sales and normally generates higher margins, Byrne said.

Warehouse, New Zealand's largest listed retailer, is in the process of rejuvenating its 91 'red shed' stores. To expand group earnings, the company aims to grow the 'non-red' side of its business to be as large as the red sheds, having bought 11 businesses in 18 months, adding technology and appliance retailer Noel Leeming, outdoor sports chain R&R Sports and online sporting goods retailer Torpedo7.

"While New Zealand is having one of the warmest starts to winter on record and the 'red sheds' remain exposed to seasonal product lines, the timing is unfortunate given a lack of visibility over the outcome of Warehouse's reinvestment and acquisition strategy and the impact of online retail," Byrne said.

Warehouse shares touched $2.99 today, the lowest level since December 2012. The stock has declined 9.6 percent since Thursday's closing price, ahead of the profit warning on Friday. It was recently trading down 0.3 percent at $3.02, taking the stock's decline so far this year to 19 percent and making it the third-worst performer on the NZX 50 benchmark index this year.

While "recent share price weakness may, in time, prove a buying opportunity, we require evidence of earnings growth to get more positive," Byrne said.

The company's 'red shed' operating margins may have reached record lows, he said.

Warehouse may not be able to sustain its dividend level if it can't generate operating leverage in 2015 and beyond, Byrne said.

In March, Auckland-based Warehouse committed to a minimum dividend of 19 cents per share over the next two years as it moves to a lower payout ratio of between 75-85 percent of adjusted profit, from a previous policy of 90 percent of adjusted profit.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

OceanaGold: Man Killed In Waihi Mine Accident

A 29-year-old man had died following a work place accident at OceanaGold mine, Waihi last night. The man was killed after the front end loader he was in rolled down a slope. The accident happened at approximately 6.30pm on Thursday night. More>>

ALSO:

Constructing Consent: Annual Housing Consents Highest In Over A Decade

More than 29,000 new homes gained building consent in the year to June 2016, up 16 percent from the previous June year, Statistics New Zealand said today. More>>

ALSO:

War Against Weevil For Future Peas: “No Peas, No Weevil” Ban Now In Place In Wairarapa

The Ministry for Primary Industries (MPI) has today placed a ban on growing peas within a specified area and placed controls on moving pea material (seed and untreated pea straw) within, in and out of this area for the next 2 years. More>>

ALSO:

Wood Producers: Crisis In New Zealand Log Supply

New Zealand wood processing leaders held a hui with senior government officials and political leaders in Whangarei yesterday to assess the acute log supply shortage to local mills in Northland. More>>

Consents And Taxes: Trustpower 'Very Disappointed' With Judgement

Trustpower is "very disappointed" with a Supreme Court ruling dismissing its bid to claim tax deductions on $17.7 million of project costs in a case closely watched by large-scale infrastructure developers. More>>

ALSO:

Fruitful Endeavours: Kiwifruit Exports Reach Record Levels

In June 2016, kiwifruit exports rose $105 million (47 percent) from June 2015 to reach $331 million, Statistics New Zealand said today. Overall, goods exports rose $109 million (2.6 percent) in June 2016 (to $4.3 billion). More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news