The Warehouse sales growth hits eight-year high

New Zealand’s largest listed retailer, The Warehouse Group, says its full-year net profit rose $12 million or 15%, boosted by a one-of gain from property sales, in a year in which sales grew by the most they have in eight years.

The retailer has revealed its net profit lept from $77.8 million to $89.8 million in the year to July 29.

But that figure recognised a $18.2 million gain from the sale of property and a further $7.3 million from the release of warranty provisions.

Profit before one-off items was  $10.8 million or 14%  lower at $65.2 million - meeting guidance given earlier this year.

Group sales were a strong feature of the result, rising $64.4 million, or 4%, to $1.7 billion – reversing many years of sales declines. 

Shares in The Warehouse are trading at $2.9 on the NZX.

The final, fully tax paid dividend remains unchanged from last year at 6.5 cents per share, to be paid on November 14, bringing total ordinary dividends for the year to 20.0 cents per share

Chairman Graham Evans says although it is early days in The Warehouse’s turnaround strategy, positive momentum has been achieved and the retailer is looking forward to the earnings boost to continue in the year ahead.

“We expect the retail sector to continue to experience mixed trading conditions in 2013,” Mr Evans says in a statement to the NZX.

“Our earnings are significantly influenced by the Christmas trading performance over the critical January quarter, which means it is too early to provide specific earnings guidance at this stage.”

Trading conditions were expected to be mixed in the year ahead.

Red sheds
The group’s 89 flagship "red shed" stores achieved operating profit of $80.9 million for the year, down $17.9 million, or 18.1%, from the same time last year.

Chief executive Mark Powell says the lower result is consistent with the company’s strategic plan.

Reported total sales rose 4.2% to $1.5 billion, driven by sales of clothing, technology, jewellery, health and beauty, and baby care products.

“I am especially pleased by the momentum we have seen in the second half of the year and the positive reaction from our customers to our refitted stores,” Mr Powell says.

Same-store sales rose 3.8%.

The Warehouse’s online business grew 63%, he said

Blue Sheds
The group’s 56 Warehouse Stationery stores achieved an operating profit of $9.8 million for the year – down slightly on the $10.1 million achieved last year.

Sales rose $5.1 million, or 2.6%, to $206.6 million.

Same-store sales rose 3.3%.

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23 Comments & Questions

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Good news.

First steps. Keep it up please.

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Are you serious? Its a terrible result - operating profit is down 15.5%!

If you can't see past the spin doctors you really need to re-evaluate your status as a sharemarket investor.

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If you can't look beyond the short term profit results you really need to re-evaluate your status as an informed critic.

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The share price is down so the market appears to agree with me.

What are you hoping for next year, another 4% rise in revenues and a another corresponding drop in operating profit? Any monkey can increase sales if they drop their margins.

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Not next year. Next 3 years. Transformation of the business.

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Ok well at this rate sales will be up 12.5% by then (4% compounded), and operating profits down 54%. Great strategy!

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Assuming linear progression of the present into the future is a sure way to not predict the future.

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PS;

Keep up the online focus and using that major buying power to swing quality cheap deals. A good plan and warehouse can make significant gains to dominate this area for the forseeable future. Well done.

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Cut margins and watch sales grow.

Also cut profits.

Great strategy.

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The WH must work harder on staff training and service. I hope Mark and his direct reports are walking each of the stores regularly . The Queenstreet store needs a close look. Its easy to get bogged down in spreadsheets and meetings - the team must not forget to walk the floors and create a bad news is great culture. No one ever re prioritized or changed plans based on good news.
Promising signs but op earnings are king in the long run.
Nice start to Mark and the team.

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The Warehouse - is this the worst retail business in the English-speaking world? Discuss.

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Quite possibly. Tindall has blown it big time holding on this long. And those over the hill directors seem to have no idea how to turn this titanic around. I certainly wouldn't be buying the property they are selling - they may not be still trading at the end of the lease period!

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Grow the online and rationalise the bricks and mortar footprint over time once this has been consolidated.

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Their online business is only the size of one medium sized store, so I wouldn't pin your hopes on that buddy...

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At the moment. There is such a thing as the future.

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So you are pinning your hopes on the online business which is approximately 0.7% of current sales (one 'store' out of 146 in total) being the saviour of this group? I hope you have something to do while you wait...

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One of the pegs.

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There's an awful lot that can be simultaneoulsy achieved over the long term by rationaising all those stores to actually support an online business rather than the current way of operating.

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Every new channel starts out as 0.7% of current sales at some time in the life cycle.

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yes but most businesses tend to be a bit more pro-active with their online strategy. The internet has been around a wee while now...

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Better late than never.

None of the other online players in NZ can leverage online with such a wide footprint over the longer term in NZ.

If it is done right of course :-)

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Why not? What about players like Grabone, One-day, etc. You don't need to have a large bricks and mortar footprint to be successful online, just a first class sourcing strategy. WHS may have buying power but this isn't evident to me in the types of things that sell well online (which are not the rubbish own brand stuff the WHS traditionally sells but more the branded stuff). I think the shakeout will continue and the WHS will continue to battle for relevance

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Interesting result considering they as an organisation are still struggling with brand pricing and service issues. You need look no further than theirgreenwash pretence that not giving a plastic bag to customers while clipping the charities 20% of those buying one in any way raises their mana. Online buying now allows kiwis to see what real bargain pricing is available in Walmart, Costco etc and that NZ Warehouse is a ripoff on so many levels and not giving any reason for customer loyalty. I predict they still suffer too many overpaid suits somewhere.

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