The Warehouse chief executive Mark Powell will continue to
invest in an online presence. Photo by the NZ Herald.
The rapid growth of retailers' online sales has become
increasingly important and online spending was up 15% during
2013, to $3.7 billion.
While some retailers are grasping the nettle and achieving
strong online sales growth, others are still struggling to
boost their online business.
Forsyth Barr broker Suzanne Kinnaird said online retailing's
rapid growth to $3.7 billion last year was driving major
structural changes to the traditional retail model.
''We're expecting further strong growth in online retailing
in the medium-term, particularly as technology improves and
geographical barriers continue to be eroded,'' she said.
Craigs Investment Partners broker Peter McIntyre said online
sales were improving earnings and margins for many retailers,
with emphasis on mid-tier retailers as opposed to high-end
fashion or low-cost retailers.
''The Warehouse has a good strategy of making small [online
company] acquisitions to work up into the larger business,''
Forsyth Barr research estimated sporting goods and apparel
retailer Kathmandu was the best placed listed retailer to
benefit from the online channel, while Hallenstein Glassons
was most at risk.
Ms Kinnaird said the ''borderless nature of online shopping''
pegged Hallenstein against strong global ''fast fashion
retailers'', who have considerable benefits of scale.
Hallensteins was hit by a surprise December sales slump and
slashed its half-year after-tax profit guidance, for the
second time in as many months, by 40%.
For online growth, Ms Kinnaird said ''we include The
Warehouse group as the best placed to positively surprise.''
The Warehouse yesterday said Christmas trading across the
group was ''strong'', and while offering up a slight profit
downgrade, emphasised online sales were ''critical'' to The
Warehouse group's success, chief executive Mark Powell said.
''Online continues to be a significant game changer in the
retail market,'' he said.
In line with its strategy to be the leading multi-channel
retailer in the country, The Warehouse group had continued to
invest in growing its online businesses with investments in
infrastructure, resources, marketing and customer
acquisitions, Mr Powell said.
''This [online] investment is critical to the long-term
success of The Warehouse group,'' he said.
Ms Kinnaird said the ''wild card'' for online growth was
The Warehouse group and it had been aggressively growing its
exposure to online retailing.
''There is potential for it to positively surprise through
bolt-on acquisitions or internally-developed websites in new
categories which leverage off its core sourcing
capabilities,'' Mr Kinnaird said.
Of the three retailers researched, Ms Kinnaird said the best
placed to benefit was Kathmandu.
The company had strong control of a single brand in which to
enter new markets through online channels and was also
implementing new systems this year to further support online
For The Warehouse's first-half 2014 trading, Mr Powell said
in a market update yesterday that while there had been total
sales growth of 5% and recovery in gross margins, the strong
Christmas result would not off-set profit margin issues at
the Red Sheds.
He downgraded previous guidance of after tax profit by about
10% to a range of $46 million to $48 million, but said
funding structures and property ownership accounted for about
half of the reduction.
''Significant investment'' had been required for Red Shed
business and new retail acquisitions - Noel Leeming and a
variety of online retailers - which prompted an increase in
funding costs and reduction in rental income, Mr Powell said.
• 92 Warehouse stores, 75 Noel Leeming , 61
Warehouse Stationery stores in NZ.
• Online business includes RedAlert.co.nz, Pet.co.nz,
ShotgunSupplements.co.nz, Torpedo7.co.nz, CoLabel.co.nz.
Source: The Warehouse