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Warehouse posts 5% gain in 3rd-qtr sales, says FY profit on track

08 May 2015

Warehouse Group, New Zealand's largest publicly listed retailer, posted a 5 percent gain in third quarter sales which it said was in line with its expectations and meant it was on track to meet its forecast annual profit.

Sales rose to $635.1 million in the three months ended April 26, from $604.8 million in the year earlier period, the Auckland-based retailer said in a statement. The sales growth lags behind the 8.6 percent increase in the year earlier third quarter.

Warehouse is focusing on reducing costs and improving its products and productivity as it seeks to getting higher returns from the hundreds of millions of dollars spent overhauling stores and buying new business the past few years.

"While this is a solid performance, particularly on the back of a difficult first half trading period, the retail environment continues to be highly competitive, and our focus remains on leveraging year-on-year profit growth for the second half year,” said chief executive Mark Powell. "These third-quarter results are in-line with expectations and consequently our full-year profit guidance remains the same."

Warehouse in March posted a 19 percent drop in adjusted first-half profit to $37.2 million, and said annual earnings on the same measure, which excludes one-time items and is the basis for dividend payments, would be between $52 million and $56 million, down from $60.7 million a year earlier.

The company's 92 'red sheds' general merchandise stores, which make up the bulk of its earnings, increased third-quarter sales 3.8 percent to $381.1 million. Same-store sales rose 3.3 percent, its 17th consecutive quarter of growth, the company said.

Store sales benefited from a strong performance during the 'back to school' period, including the first key trading period for its SchoolTex school uniform business acquired from indebted retailer Postie Plus Group last year. Sales in the home category, and apparel and leisure were also positive, with apparel contributing to an improvement in gross margins, the company said.

"The third quarter saw a much improved performance on a challenging first half, with solid sales grown and improved gross margin," Powell said.

Its 65 Warehouse Stationery stores increased sales 2.9 percent to $70.2 million. Same-store sales rose 2.1 percent, its 23rd consecutive quarter of growth.

The stores benefited from 'back to school' and 'tax time' campaigns which saw a strong lift in transaction count from the year earlier period, Powell said.

The company's Noel Leeming appliance stores increased sales 5.4 percent to $154.8 million as it benefited from a rebranding and new stores, gaining market share. It closed two stores during the quarter and opened one new store, leaving it with 78 stores at the end of the period, compared with 76 the year earlier. Same-store sales edged up 0.9 percent. 

Sales at the Torpedo7 Group rose 8.5 percent to $30.6 million. Powell said the unit is still in the early stages of development in its plan to become the nation's leading outdoor, adventure sport omni-channel retailer.

Separately, Warehouse today said the indicative interest rate for its planned bond sale would be between 5.3 percent and 5.55 percent per annum. The company plans to sell as much as $125 million of five-year bonds to refinance $100 million of bonds maturing next month, and for general corporate purposes.

Shares in Warehouse last traded at $2.74, and have shed 12 percent so far this year, lagging behind a 2.9 percent gain in the benchmark NZX 50 Index. The stock is rated an average 'sell', according to analysts polled by Reuters.

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