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Profit up for Warehouse

NZN 22/09/2016 Paul McBeth

Warehouse Group lifted annual earnings 12 per cent, just beating its guidance, as the country's largest listed retailer eked out bigger reductions in its cost base to widen operating margins.

Adjusted profit rose to $64.1 million in the year ended July 31 from $57.1 million a year earlier, the Auckland-based company said.

Revenue increased 5.6 per cent to $2.92 billion with sales growth across all of the retailer's brands. Gross margins shrank due to its Noel Leeming group lifting sales of low-margin consumer electronic goods, however, operating margins widened to 3.8 per cent as Warehouse focused on stripping out costs.

Net profit rose 49 per cent to $78.3m.

Chief executive Nick Grayston said the board has approved his three-year strategy which will focus on lifting profitability by removing "complexity and cost" of an inefficient operating model and reshape the company's physical footprint to support the digital business.

The group's online sales rose 22 per cent to $185.8m, accounting for about 6 per cent of total revenue.

"The improvement in the financial performance of the group demonstrates that the trading strategies are delivering results," Mr Grayston said.

"Our task is to ensure that the business is a strong and profitable competitor in the future retail environment, which will look very different from the traditional retail business model that has served us so well to date."

Warehouse spent hundreds of millions of dollars overhauling its outlets and buying new businesses to drive future growth in the past few years.

The board declared a final dividend of 5 cents per share, taking the annual return to 16 cents, unchanged from a year earlier.

The shares last traded at $2.90, and have increased 8.6 per cent this year.

The company's flagship 'Red Sheds' stores lifted sales 2.5 per cent and the blue shed stationery chain increased sales 6.2 per cent.

Noel Leeming profit jumped 88 per cent to $12.1m, grabbing market share with the collapse of consumer electronics chain Dick Smith.

Torpedo7 boosted sales for a profit of $3.4 million, building on the breakeven result it achieved a year earlier, while the launch of its financial services unit reported an operating loss of $3.4m, which Warehouse said was in line with expectations.

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