Warehouse Group expects first half earnings to fall about 20 per cent as cold, wet spring and summer weather prompts it to discount clothing and other seasonal merchandise at its “red sheds” general merchandise stores and sales decline at its Noel Leeming consumer electronics chain.

The shares were down 8.4 per cent at $NZ2.85 on Wednesday morning, having traded as low as $NZ2.83, their lowest level since September 2012.

The Auckland-based company said adjusted profit probably will drop to $NZ37 million ($A34.45 million) in the six months ending January 25, from $NZ46.2m in the year earlier period.

The company had previously expected first half profit would be in line with last year.

Investors and analysts have said they want the company to produce profit growth this financial year after the retailer spent hundreds of millions of dollars overhauling stores and buying new businesses the past few years.

The company, which has previously forecast a rise in annual earnings, will update its guidance when it releases its first half earnings on March 6.

“The combination of flat sales and lower margins in the Red Sheds and lower sales in Noel Leeming have magnified the impact on first half profits compared to last year,” said Warehouse Group, CEO, Mark Powell.

“It is not expected that we will see a similar level of decline in the second half.”

Costs associated with the rebranding of the company’s Noel Leeming and Torpedo 7 chains were one time items that impacted the first half, and wouldn’t be repeated in the second half, he said.

Warehouse said the unseasonal spring and summer weather meant second quarter sales and margins at its general merchandise stores missed expectations, particularly in December.

Meanwhile, Noel Leeming sales fell compared to the year earlier period when sales were boosted by a switch to digital TV, and as an expected Christmas sales rush “did not materialise”.

BusinessDesk