Warehouse upgrades firsthalf profit forecast by $20m after strong trading

AUCKLAND: The Warehouse Group has upgraded its profit forecast for the first half of the new financial year, saying its expects to make a profit of more than $90 million.

In a trading update to the market, the retail chain said its original expectation of $70 million net profit after tax for the six months to January 31 had been upgraded to more than $90 million after a bumper trading period over Christmas, Boxing Day and the New Year period.

‘‘Due to continued strong trading through the week leading up to Christmas and over the Boxing Day and New Year period, and revised expectations for trading in January, the group has upgraded its guidance of adjusted NPAT for the half year,’’ the company said.

The group, which operates The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7 stores, expects its gross margin for the halfyear will be up about 170 basis points. It expects its cash position for the half year to be better than its FY20 yearend total of $168 million.

The Warehouse repaid the $68 million it received in government wage subsidies in December, after it came under fire from unions, commentators and some politicians, including the Prime Minister, for taking the money, laying off staff and then reporting a fullyear profit of $44.5 million.

The group said it decided to repay the subsidies due to strong trading before Christmas.

Without the subsidy, the company would have made a loss of just over $4 million.

Firstquarter sales for the group increased by 6.3% and are now up 6.6% yeartodate, compared with the same period last year — better than expected.

Retail consultant and analyst Chris Wilkinson, managing director of First Retail Group, said the $20 million profit upgrade was impressive — and reflected strong spending trends seen across the industry.

‘‘It reflects where a lot of retailers are sitting at the moment, particularly the larger retailers; they have all benefited from strong consumer confidence and that has translated into sales and [increased] profitability,’’ Mr Wilkinson said.

Less discounting across the sector as a result of supply issues and increases in freight charges, along with sustained strong property values, were driving strong earnings among retailers, he said.

‘‘Large retailers, right through to smaller ones, are reporting very strong consumer confidence which is driving foot fall, average sales values are much higher and transaction volumes are up.’’ — The New Zealand Herald