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

 

Reserve Bank: Wheeler Keeps OCR At 1.75%

Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged at 1.75 percent, as expected, and reiterated his view that the benchmark rate doesn't need shifting for the foreseeable future. More>>

ALSO:

Retail: Pumpkin Patch Brand, IP Sold To Catch Group

The receivers of failed children's clothing retailer Pumpkin Patch have confirmed that the company's brand and intellectual property have been sold to Australian online retailer Catch Group. More>>

ALSO:

Oil: 2017 Block Offer Petroleum Tender Launched

New Zealand is well-placed to take advantage of the economic benefits of oil and gas exploration, Energy and Resources Minister Judith Collins announced today at the launch of the 2017 Block Offer petroleum tender. More>>

ALSO:

OECD And Zero Carbon Reports: Environmental Pressures Rising In New Zealand

New Zealanders enjoy a high environmental quality of life and access to pristine wilderness. However, New Zealand’s growth model, based largely on exploiting natural resources, is starting to show its environmental limits with increasing greenhouse gas emissions and water pollution ... More>>

ALSO:

Statistics: Record Net Annual Migration Levels Continue

In the February 2017 year, 71,300 more migrants arrived in New Zealand than left, Stats NZ said today. This equalled the previous annual record set in January 2017. More>>

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news