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The Warehouse has cut its profit forecast for this financial year. Image credit: NZME
Shares in retail group The Warehouse have tumbled after it released a grim earnings forecast that analysts said was emblematic of current economic conditions.
The retail group currently expects sales to continue to
Operating costs decreased by 6-7% compared to the previous year.
The Warehouse also expects to deduct the loss from discontinued operations and any Potential restructuring Costs ranged from $22 million to $30 million, compared with $83.4 million last year.
“Going concern” does not include Torpedo7, priced at $1 in Februarybut included results for TheMarket.com, which The Warehouse wanted to sell.
Mark Lister, investment director at Craigs Investment Partners, said the update reflected the difficulties in the retail environment and the broader economic situation.
As of mid-afternoon, the company’s shares were trading at 98 cents, down 9 cents, or 8.4%, from Friday’s close. They have fallen 41% over the past 12 months.
This once-popular stock is now well below its December 2022 peak of around $3.50.
The group said New Zealand’s retail sector faced challenges, with increasingly subdued consumer demand, coupled with mild winter weather, leading to lower-than-expected fourth quarter sales.
Interim chief executive John Journee said retail across New Zealand was under pressure and The Warehouse was no exception.
“Market conditions and cost-of-living pressures continued to challenge our fourth quarter results, and we expect these conditions to continue through the end of the year,” he said.
“We are taking decisive action internally to address areas where improvements can be made.”
The company is implementing tighter cost controls and focusing on its core brands – The Warehouse, Warehouse Stationery and Noel Leeming.
Change date Nick GraystonHe was brought in in 2016 to steer the company out of its troubled waters.
Grayston resigned in May, with the company saying it needed “fresh energy” to change direction.
Lister said the forecast earnings decline was not surprising given current economic conditions.
“The Warehouse is a company that is at the forefront of economic activity,” he said.
“As a retailer exposed to discretionary spending, they will be among the first to feel the brunt of the economic slowdown.”
Lister said April, May and June appear to be slow months for the retail industry, where conditions are starting to deteriorate.
“Consumers have put their wallets away.
“People have no job security, unemployment is rising, and there’s no relief in sight on the interest rate front.
“House prices are falling, which tends to have a reverse wealth effect.
“All of these factors have combined to cause The Warehouse to struggle and the share price has responded.”
Lister said this was of little comfort to long-suffering Warehouse shareholders.
“It’s hard to see any relief in the short term because I think the economy is going to remain in this difficult situation for a while.”
Data released last week showed that India’s GDP grew by just 0.2% in the March quarter, but economists expect the current economic downturn to continue for several months.
The warehouse will announce its July results on September 26.
Jamie Gray is a reporter based in Auckland covering financial markets and primary industries. He joins The Herald in 2011.
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