NEW ZEALAND: The recent annual meeting of listed New Zealand company The Warehouse Group has testified to the country's economic slump. Announcing the company's results on November 28, chairman Keith Smith confirmed that despite a difficult trading environment Warehouse had achieved a net profit after tax of NZ$ 90.8 million (A$ 74.9 million) compared to NZ$ 114.8 million last year.
However this was on the back of sales of NZ$ 1.74 billion, down 1.5 per cent on the previous year. Net profit after tax excluding unusual items was NZ$ 80.9 million compared to NZ$ 97.5 million in FY07.
"The results, whilst below those of last year, need to be viewed in light of the slow down in economic activity in New Zealand. Trading conditions in the last two quarters were especially challenging with the New Zealand economy in recession and households struggling with dramatic increases in the prices of food and petrol and falling property values."
Meanwhile, in October the board had taken the decision to withdraw from its food offer in Extra stores, he said.
"The company embarked on the strategy knowing the risks involved including those around the ability to create buying leverage in a competitive grocery market. The primary driver was to create a halo effect so that when people were buying food, they also bought more higher margin general merchandise and apparel. The concept was trialled in three stores to assess the ability to achieve this critical halo effect. Whilst a halo effect was achieved in each of the three stores, it was significantly below that required to achieve the necessary level of returns. As a consequence of this, the strategy was considered not capable of meeting our investment criteria, and hence the decision."
Commenting on the results, Warehouse managing director Ian Morrice said the company's increased focus on improved product quality and choice was working, with apparel sales up 5.8 per cent year on year.
Going forward The Warehouse Group would focus on profitable growth, maintaining its price leadership position, building on product innovation and quality improvement, investing in store modernisation and in-store experience, developing regional growth opportunities, investing in on-line retailing, driving simplification and cost reduction to counter inflationary pressures, Morrice added.
It was also hoped Warehouse's apparel and footwear business would continue to drive sales through the Rachel brand - launched earlier this year in an exclusive partnership between fashion icon Rachel Hunter and The Warehouse Group - as well as the penetration of new customer segments, he said.