Photo: RNZ / Nate McKinnon
Retailer The Warehouse has reported a first half loss with sales down 5 percent, reflecting the sale of its sporting goods brand, Torpedo7, for a dollar.
The Warehouse Group, the country's biggest retail company, owning well-known brands including its red sheds, stationary and Noel Leeming, said the sale of Torpedo7 had a severe impact on the bottom line.
Key numbers for the 6 months ended January 29 compared with a year ago:
- Net loss $23.7m* vs net profit $17.4m
- Revenue $1.63b vs $1.8b
- Net profit from continuing operations $32.1m vs $23.6m
- Gross margin 34.3% vs 32.7%
- Interim dividend 5 cents per share vs nil
- *Includes $55.5m loss from Torpedo7 as well as non cash impairment from its sale.
"While the disposal of Torpedo7 means we have incurred significant write-downs, it allows us to redirect our focus towards our core brands and build on the $30.7 million in adjusted net profit from our continuing operations," chief executive Nick Grayston said.
The retailer also intended to close or sell its online platform, TheMarket, which had failed to meet growth expectations, by the end of this financial year.
"We are re-directing our focus and learnings into growing Group Marketplace on The Warehouse site and app, where we are now seeing improved profitability," Grayston said.
The Warehouse red shed sales fell 4.7 percent in the first half over the year earlier, though grocery sales rose nearly 12 percent and accounted for 20 percent of the chain's sales.
Warehouse Stationery sales fell 5 percent, with back-to-school season sales pared back to essentials.
Noel Leeming sales fell 2.2 percent amid higher cost of living expenses.
The company sold its sporting goods chain Torpedo7 for one dollar, last month, with the sale expected to be completed by the end of March.
Torpedo7 had struggled in recent months, with sales down more than 25 percent in the first quarter, though represented just 5 percent of The Warehouse group sales.
"In making these choices to simplify our business, we're acknowledging that we didn't create the growth or profitability that we wanted to, or in the timeframe we needed in these businesses," Grayston said.
"These calls are needed to set us up to be a much leaner, sharper-focused group in the future."
Grayston said the changes were already resulting in improvements with a 160-basis-point improvement in group gross profit margin with a tighter control of costs.
However, tough retail conditions were expected to persist through the second half, he said.
"Our second half is now underway, and we've seen much tougher trade in February with sales decline in the low teens. In March, we've seen some improvement with our sales decline returning to be more in line with the level of decline experienced in our first half."
The company said it would provide a third quarter trading update in May.