The Warehouse lifts sales, outpacing last year's 3.5% gain

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The country’s largest publicly listed retailer, The Warehouse Group [NZX: WHS], boosted first-quarter sales 7.7% and improved margins at its discount chain ahead of the key Christmas trading period.

Group sales rose to $634.5 million in the quarter ended November 1, from $589.4 million in the year-earlier quarter, when sales increased 3.5%.

The Warehouse, which posted a 5.9% drop in profit last year, is seeking to generate earnings growth following a $100 million 'refresh' programme for it’s the Warehouse discount stores, the acquisition of Noel Leeming and Torpedo 7, and its move into online sales.

The Warehouse stores, which make up 59% of total sales, increased revenue 4.1% in the quarter. The increase in sales, following the launch of new season home and apparel ranges, was offset by lower entertainment sales, while gross margins improved as it discounted less on winter season apparel and home stock.

"This sales growth was achieved with low levels of clearance activity, resulting in improved gross margins compared to last year while stock levels are well positioned ahead of the important Christmas trading period," said chief executive Mark Powell says. "We are continuing to focus on delivering profit improvement for our shareholders after a period of reshaping and investment and this starts with maintaining positive sales growth."

Noel Leeming first-quarter sales jumped 14% to $163.9 million, as it cycled a weaker year-earlier quarter impacted by limited stock in smartphones and a digital switchover. It benefited from increased cellular sales and demand for fitness products and the Apple Watch. During the quarter, it consolidated its two Whangarei stores into one.

"The technology and appliances market remains extremely competitive which places pressure on margins, however our market share continues to grow, reflecting the differentiation Noel Leeming is building through its strategy of delivering customer service excellence," Mr Powell says.

Warehouse Stationery sales increased 7.7% to $62.8 million as the company opened its first store in Queenstown.

Torpedo7 sales rose 18% to $33.9 million following improved stock availability, product range and targeted promotions.

The group's online sales increased 16% to $37 million, reflecting growth across all brands.

On a same-store basis, which excludes changes in store numbers, sales at The Warehouse chain increased 3.6%, the 19th consecutive quarterly increase, while Warehouse Stationery sales rose for a 25th consecutive quarter, up 4.1%, and Noel Leeming sales advanced 10%.

The Warehouse is scheduled to update media at a briefing in Auckland today, stoking speculation it will detail plans for a new lending business.

Its shares last traded at $2.71 and have dropped 13% so far this year. The stock is rated an average “sell” according to a poll of six analysts’ recommendations compiled by Reuters.

(BusinessDesk)