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BusinessDesk: Warehouse posts 8.9% drop in FY profit before items, forecasts weaker 2012

BusinessDesk: Warehouse posts 8.9% drop in FY profit before items, forecasts weaker 2012

Warehouse Group Ltd., the biggest retailer on the NZX 50 Index, posted an 8.9% decline in full-year earnings before items and said profit may decline again in 2012, reflecting an uncertain retail sector and costs of sprucing up its stores.

Profit excluding unusual items fell to $76 million in the 12 months ended July 31, from $83.4 million a year earlier, the Auckland-based company said in a statement. Net profit climbed to $77.8 million from $60.2 million in the previous year, when it took a $22.8 million charge on changes to depreciation rules. Sales fell 0.3% to $1.67 billion.

The retailer said even though the economic outlook should help buoy consumer confidence, the global economic backdrop in uncertain and volatile, leaving doubt over scope of any growth in retail spending.

Government figures last month showed New Zealand retail spending grew 0.9%, seasonally adjusted, in the second quarter, amid signs households were feeling more confident. Consumer confidence rose to a seven-month high in August, according to the ANZ-Roy Morgan Consumer Confidence survey.

Profit before items in 2012 may slip to $70 million, with net profit of about $80 million, the company said today.

“Some pressure on earnings is likely to remain in the short term as we work through the early stages of implementing our strategy,” chairman Graham Evans said.

Warehouse will pay a final dividend of 6.5 cents a share with a record date of Nov. 4. Its shares last traded at $3.45.

Warehouse ‘Red Shed’ department stores had annual sales of $1.46 billion, down 0.9%. Same store sales also rose 0.9%. Operating earnings fell 12% to $112.7 million.

Warehouse Stationery sales rose 4.1% to $201.5 million while same-store sales gained 4.6%. Operating profit at the stationery stores rose to $10.1 million from $8 million a year earlier, when it recognised $1.2 million of charges for restructuring distribution.

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