Red Shed sales continued to grind higher in the three months
ended April as customer numbers and basket sizes improved,
Craigs Investment Partners broker Chris Timms said yesterday.
The Warehouse Group, the owner of the Red Sheds, reported
improved group sales of $604 million, up 8.6%, for the
Same-store Red Shed sales were up 3% at $367 million, Blue
Shed sales were up 6.1% at $68.2 million, Noel Leeming sales
were up 10.9% at $146.9 million and Torpedo7 sales were up
12.6% on a pro forma basis at $22.7 million.
Mr Timms said now the board was comfortable with the sales
momentum, after a significant reinvestment strategy, the
focus had shifted to delivering operating leverage and
bottom-line returns - the key end point for any business
The commentary yesterday was a significant change from the
first quarter which said the group would continue to invest
in growth at the expense of earnings in the short-term, he
After significant margin pressure at the Red Sheds in the
first quarter, the second and third quarter margins were
ahead of the previous corresponding periods, he said.
The Blue Sheds would go close to achieving $250 million in
sales in the 2014 financial year.
''The consolidation of Noel Leeming and Bond and Bond stores
is performing well but investment will maintain pressure on
Mark Powell was a ''stunning chief executive officer'' who
had surrounded himself with a good team, Mr Timms said.
Mr Powell had already increased the wages of group staff
before expressing concern about the amount of his salary.
''We still have questions about the online roll-out but we
have lifted our share price target to $3.64. The adopted
strategy is bearing fruit,'' Mr Timms said.
Mr Powell said in a statement the group was investing in
Torpedo7 to create a leading multichannel outdoor, adventure
''We continue to be excited by the growth opportunities we
see in this area of our business.''
Chairman Ted van Arkel said the group strategy continued to
develop in the quarter.
The announcement of the financial services strategy and
associated capital raising would help support the growth
momentum being seen.
The board was confident the strategic focus would deliver
long-term results for shareholders in a retail environment
that was continuing to evolve as customers' buying habits
changed, Mr van Arkel said.
At a glance
The Warehouse Group Ltd comprises 91 Warehouse stores, 76
Noel Leeming stores and 64 Warehouse Stationery stores in New
Zealand and several online businesses. The company had
turnover of $2.2 billion in the 2013 financial year and
employs more than 10,000 people.