The Warehouse raises profit forecast by another $20m after 'strong trading'

Thursday, 25 February 2021

The Warehouse Group has raised its first-half profit expectation for the second time in as many months as trading improves and it manages costs, lifting margins.

The retailer increased its forecast for net profit in the six months to the end of January by $20 million to more than $110m. It had already raised its forecast by $20m to more than $90m last month, following its initial guidance of $70m in December. The forecasts don’t take into account the impact of repaying its $68m government wage subsidy.

The Warehouse Group, which includes The Warehouse, Warehouse Stationery, Noel Leeming, Torpedo7, TheMarket and 1Day, experienced strong trading over the January period, combined with excellent operational performance and cost management, said chief executive Nick Grayston.

The group’s trading gross margin will increase by about 185 basis points, ahead of its previous expectation of 170 basis points, and the company expects to be holding about $183m in cash, up from $168m at the end of its financial year on August 2, he said.

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* The Warehouse net profit down 20%

**

The Warehouse is among retailers which have benefited from a bounce back in trading as consumers spent up following lockdown. The pandemic came at a time when the company was on the cusp of a major restructuring, which saw it close some stores, cut hundreds of jobs and change rosters which the retailer said was necessary to respond to shifts in shopping behaviour.

“Clearly the economy is awash in money at present, people can’t travel, and they are spending, and The Warehouse and many other retailers are benefiting from that,” said Matt Goodson, a portfolio manager at Salt Funds Management.

“The question for investors is how repeatable is that – that’s something people are grappling with,” Goodson said. “Right across Australia and New Zealand, we are seeing some incredibly strong retail results, but if it’s only a one-off, the degree to which you want to pay for that is a bit limited.”

Shares in The Warehouse jumped 4.9 per cent to close at $3.40, their highest level since 2014.

The Warehouse is scheduled to release its first-half results on March 25.