Red Shed Warehouse stores' sales rose more than 13 percent for the 6 months ended 29 January. (file image) Photo: RNZ / Nate McKinnon
Profits for the country's biggest retailer, The Warehouse, have been more than halved as trading slowed and margins fell for most parts of the business.
Key numbers for the 6 months ended 29 January compared with a year ago:
- Net profit $17.4 million versus $44.4m
- Revenue $1.8b versus $1.72b
- Restructuring costs $6.3m
- Gross margin 32.7 percent versus 34.7 percent
- No interim dividend
The company said it had strongly contrasting performance between the first and second quarters, with a strong surge at the beginning which faded in the second quarter as economic conditions tightened, its costs increased, and it bore the cost of a restructuring.
Group chief executive Nick Grayston said the trading environment was "challenging" as it contended with high inflation and continuing cost of living pressures, and it consciously kept a lid on its prices.
"We are taking decisive action to improve financial performance and operational efficiency across the Group. This includes rebalancing capital expenditure to focus on operational performance and reprioritising transformation projects to concentrate on EBIT delivery."
The company was cutting costs, which had included cutting up to 340 jobs at its Auckland Store Support Office, while it would also make organisational changes by closing its one-day operations and bringing TheMarket.com and Torpedo7 into the group structure, Grayston said.
"Gross profit margin management will be particularly important in the second half, with a focus on maintaining value for our customers while recalibrating some of the investment in margin that was made in the first half," he said.
There were mixed results through the group's various brands, with the Red Shed Warehouse stores' sales rising more than 13 percent, but the former big earner electrical and appliance chain Noel Leeming sales fell 4.5 percent, with the operating profit falling 41 percent, as consumers cut spending on big ticket items.
The smaller Warehouse Stationery had a lift in sales but reduced operating profit, while outdoor goods chain Torpedo 7 fell to a loss as the Covid-inspired biking and exercise popularity faded and poor weather hit camping goods sales.
Grayston said shoppers returned to its stores leading to a near halving of online sales, but there had been 34 percent growth in grocery sales, and accounting for more than a fifth of Red Shed sales.
However, he expected a tough second half because of rising costs, inflation, interest rates, and wages.
"While the macroeconomic outlook remains unpredictable, we are taking action to ensure the ongoing improvement in operational performance," Grayston said.
The company did not declare a first-half dividend, with a payout decision left to the full-year result.