Warehouse lowers annual profit, dividend forecast on weaker trading

Warehouse Group lowered its forecasts for annual profit and dividends after New Zealand's largest listed retailer posted weaker first-half earnings as its Red Sheds and Noel Leeming units missed expectations.

Full-year adjusted net profit, which excludes one-time items and is the basis for dividend payments, will be between $52 million and $56 million, down from $60.7 million a year earlier, it said in a statement. The company lowered its full-year dividend forecast to 16 cents per share, down from its previous forecast of 19 cents, which it paid last year.

Warehouse shares are rated an average 'sell' and have shed 19 percent of their value over the past year as analysts and investors say they want the company to start producing profit growth after the retailer spent hundreds of millions of dollars overhauling stores and buying new businesses the past few years. The retailer today posted a 19 percent drop in adjusted first-half profit to $37.2 million, in line with its forecast.

"While the board recognise that the half was challenging in many respects, strategically a strong base has been built for the future, with the priority now to deliver a satisfactory return on the investments made," said chairman Ted van Arkel.

The company will pay a first-half dividend of 11 cents per share on April 16, representing 102.5 percent of adjusted net profit.

In order to invest in its business to drive future earnings, the company last year cut its dividend payout ratio to between 75-85 percent of adjusted profit, from a previous policy of 90 percent of adjusted profit. To provide certainty for shareholders, it said the policy would be phased in over two years when a minimum dividend of 19 cents per share would be paid.

Warehouse today said the dividend policy for future periods will be reviewed against its business plan for the 2016 financial year and announced with its full year results.