Warehouse says profit growth will resume in 2015 following a decline in 2014
By Tina Morrison
Sept. 12 (BusinessDesk) - Warehouse Group, New Zealand's largest listed retailer, expects earnings to rise this financial year following an 18 percent drop in 2014 as it benefits from investments in refurbishing its stores and adding new businesses.
The Auckland-based retailer said adjusted profit, which excludes one-time items and is the basis for dividend payments, fell to $60.7 million, or 18.6 cents a share, in the 52 weeks ended July 27, within its forecast range of $59 million to $62 million, and down from $73.7 million, or 23.7 cents, a year earlier. Net profit fell 46 percent to $77.8 million, it said.
Warehouse has increased spending on its 91 distinctive large format 'red shed' stores to drive future growth in the unit that accounts for about two thirds of its retail sales. To expand group earnings, the company aims to grow the 'non-red' side of its business to be as large as the red sheds, adding technology and appliance retailer Noel Leeming, sports foods retailers R&R Sports and Torpedo7 and finance company Diners Club New Zealand. The company said today that earnings growth would resume in the current year.
"While our adjusted profit has reduced from the previous year, the company has been significantly reshaped and is well positioned for the future," chairman Ted van Arkel said. "The board understands that this now has to be leveraged into profit growth, and management is very focused on achieving this. the key elements of the group's strategic plan should ensure adjusted net profit after tax in FY15 is above that recorded in FY14."
Warehouse will pay a final dividend of 6 cents a share on Dec. 11, taking the annual dividend to 19 cents, lower than the 21 cent dividend in 2013.
The company expects to provide more detail on its earnings expectations for the 2015 financial year with the release of its first-half earnings in March.
In the 2014 year, group sales rose 18 percent to $2.65 billion.
In 2014, operating profit at The Warehouse stores fell 9.7 percent to $76.9 million as revenue rose 4.7 percent to $1.67 billion. The operating margin slipped to 4.6 percent from 5.4 percent the year earlier.
The company's Warehouse Stationery stores boosted earnings 14 percent to $11.8 million as revenue rose 8 percent to $250.6 million. The operating margin increased to 4.7 percent from 4.5 percent.
Its Noel Leeming unit increased earnings 2.7 percent to $11.3 million while revenue jumped 59 percent to $620.5 million. The operating margin slipped to 1.8 percent from 2.8 percent.
The Torpedo7 business increased earnings 65 percent to $1.1 million as revenue rose to $107.7 million from $24.2 million. The operating margin fell to 1 percent from 2.7 percent.
The shares fell 1.3 percent to $3.09 yesterday, and have shed 17 percent this year. The stock is rated an average 'sell' based on seven analyst recommendations compiled by Reuters with a median target price of $$3.20.