One of New Zealand's largest department stores, TheWarehouse Group, has revealed a drop in sales and profit.
From August 2 2010 to 31 July 2011 the group reported a 3 per cent drop in revenue from $1,672.695 million to $1,667.777 million.
Operating profit was down 8 per cent, from $124.049 million in 2010 to $114.136 million, and earnings before interest and tax was down from $126.575 million in 2010 to $119.375 million, a decrease of 5.7 per cent.
Despite profit before tax being down by 8.1 per cent, from $119.166 million in 2010 to $109.530 million, Warehouse chief executive officer Mark Powell said he is confident about the future.
“While the underlying results are down on last year, in the four months since becoming group CEO I can see that the core business is sound and I’m confident that our three year reinvestment strategy will deliver positive results, but it will take time to build momentum.” Powell said.
Powell went on to say that looking forward the company is now focused on implementing a strategy based on improved retail execution and significant capital reinvestment in the company’s stores.
“We are very confident that customers will respond positively to what we’re doing, we believe this will translate into sustainable sales and earnings growth over the medium to long-term,” Powell said.
He said despite the in-store results, online sales doubled with continued range expansion and increased traffic to the site.
In a strategy briefing Powell said that being online is part of being ‘in the game', not an optional extra.
As well as a revitalised advertising campaign, many stores will be modernised and refitted, with 'significant capital investment' over three to five years.
Warehouse chairman Graham Evans said while the general economic outlook for New Zealand supported ongoing improvement in consumer confidence, a number of factors both domestic and international, point to an economic backdrop characterised by continued uncertainty and volatility.
“As such, the extent of any underlying growth in retail spending is uncertain and some pressure on earnings is likely to remain in the short term as we work through the early stages of implementing our strategy,” Evans said.
Recognising the short term impact of the company’s strategy, the board has indicated that subject to any material change in the trading environment, adjusted net profit after tax for the 2012 financial year is expected to be in the order of $70 million, with reported net profit after tax for the 2012 financial year expected to be in the order of $80 million.