The Warehouse Australia Turnaround On Track

Auckland, 14th March 2005

The Warehouse Announces Full Year Earnings Guidance Unchanged

The Warehouse Australia Turnaround On Track

– The board of The Warehouse Group Limited announced a half year unaudited operating profit of $53.9m, down 2.8% on the corresponding period last year. Earnings before interest and tax (EBIT) for the group was up 1.8% to $92.0m. Total sales for the group were $1.214b, down 2.3%. Full year earnings guidance of $66m to $71m remains unchanged.

In announcing the half year result for the period ending 30 January 2005, Chairman Keith Smith says, “The Warehouse New Zealand ‘Red Sheds’ remains a strong customer destination with customers continuing to benefit from lower prices. However, the changing seasonal demands for products experienced in this half, together with the impact of price deflation in key apparel and footwear categories, meant that the Red Sheds’ sales and margins were below expectations”.

The Warehouse Australia ‘Yellow Sheds’ remains on track for a turnaround. Mr Smith says, “A bright light in the performance was the promising result in Australia and the posting of an operating surplus (earnings before interest, tax and amortisation) of $5.3m, an $18.3m improvement on the previous period’s trading.”

Australian sales at $299m were down 8.7% on conversion to New Zealand dollars but only 3.9% in Australian dollars.

In New Zealand, the Red Sheds posted a lower operating surplus, down 12.3% to $90.1m.

Group Chief Executive Ian Morrice says the results underline the importance of the changes that are already underway in New Zealand, which were also outlined to shareholders at the annual meeting.

“The New Zealand retail environment is changing rapidly, and we are re-positioning The Warehouse to ensure that our overall offer leads the market on price,” Mr Morrice says.

“While sales at the Red Sheds were constant at $819m, higher occupancy and store operating costs eroded operating margin to 11.0% from 12.6% for the corresponding period last year.”

The Warehouse Stationery ‘Blue Sheds’ sales at $96.1m were down 4.7%. Mr Morrice says, “The Blue Sheds sales shortfall in the second quarter was due to a shift in the peak ‘back to school’ sales week this year from Q2 to Q3 and very high sales of PCs in the corresponding period last year.”

Directors have declared a fully imputed interim dividend of 10.5 cents per share, unchanged from last year. This will be paid on 26 April 2005, with the entitlement date being 15 April 2005.

ENDS

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