Price cuts weigh on Warehouse

The Warehouse Group has taken a profit hit following its decision to lower prices to its customers.

Profits have dropped 15 per cent from to $35.3 million after tax for the half-year ended January 28, from $41.6m for the same period a year earlier.

This comes after the company announced a 2.8 per cent drop in sales during the ‘‘critical’’ Christmas trading period in 2017.

Chairwoman Joan Withers said the profit slump was due to a number of ‘‘major changes’’ in the business, including a shift from ‘‘hi-low’’ pricing to ‘‘everyday low price’’ strategy at The Warehouse stores.

In addition, combining Warehouse Stationery into The Warehouse caused ‘‘a number of internal systems and process challenges’’, Withers said.

That, coupled with softer trading in key categories, saw a ‘‘sharp decline’’ in profit at Warehouse Stationery.

‘‘The return to more normal performance levels is a key focus for what has been historically a very strong performer for the group,’’ she said.

The stationery business started to recover towards the end of January, as it entered its key back-to-school trading period.

Withers said the company’s focus for the first half had been to ‘‘relentlessly trade the peak retail season’’, while also focusing on its transformation.

The Warehouse Group owns The Warehouse, Warehouse Stationery, Noel Leeming, and Torpedo7.

Sales at Noel Leeming were up 7.5 per cent to $453.9m. Cellular and portable audio were most popular during the period, while television sales remained on par with a year earlier.

Torpedo7 reported sales of $88.6m for the half-year, up 2.5 per cent.

Group online sales were up 10.5 per cent to $117.4m, while sales on its daily deals website 1-day.co.nz were flat.

The Warehouse Group shares were unchanged at $2.02 a share in early afternoon trading yesterday.