Wellington, Sept 11 NZPA - Retailer The Warehouse Group reported a 15.4 percent fall in full year net profit to $76.8 million, affected by a $7.4m post tax charge relating to the company's exit from fresh food and liquor.

For the 53 weeks to August 2, net profit excluding unusual items was up 5.3 percent from the previous year to $85.2m, the company said today.

For the second half, net profit excluding unusual items rose 17.8 percent to $28.4m.

Group sales for the year slipped 0.8 percent to $1.72 billion.

A final dividend of 5.5c per share is to be paid bringing the total ordinary dividend for the year to 21cps, unchanged from last year. A special dividend of 10cps was also declared.

Chairman Keith Smith said very strong cash flow had enabled the company to not only maintain its final ordinary dividend for the year but to also distribute accumulated imputation credits to shareholders by way of the special dividend.

Group chief executive officer Ian Morrice said retail sales demand was expected to gradually improve in the coming year, but uncertainty would continue to be a feature of the economic environment.

Whether recent signs of economic improvement would translate into a sustained upturn remained to be seen, he said.

The Warehouse red sheds operation reported sales of $1.53b. Adjusting for the 53rd trading week and discontinued fresh food and liquor categories, sales were down 0.8 percent, while same store sales were down 0.4 percent.

Earnings before interest and tax of $120.2m at The Warehouse were up 6.6 percent on the previous year, including $5m profit improvement relating to the exit from fresh food and liquor.

Mr Morrice said The Warehouse result reflected a strong trading plan to drive sales and the measured response taken in a difficult trading environment.

"Our focus on gross margin, inventory management and cost reduction underpinned the profit outcome and strong operating cash flows," Mr Morrice said.

For the second half same store sales were up 1.6 percent, with fourth quarter same store sales up 2.3 percent.

During the year the first Warehouse Local store was opened in Mosgiel.

Warehouse Stationery reported sales of $187.2m, down 7 percent on last year after adjusting for the 53rd trading week.

Same store sales were down 7.1 percent for the year, while earnings before interest and tax for the year were $1.6m compared to $5.1m the year before.

"During this economic downturn many specialist retailers have been particularly hard hit," Mr Morrice said.

"Cost reduction initiatives implemented during the year were not sufficient to offset the impact of sales deleverage.

"The market for big ticket items was particularly difficult with most of Warehouse Stationery's sales reduction attributable to office furniture and technology products."