Ted van Arkel
Warmer autumn and winter temperatures have caused The
Warehouse Group to downgrade its profit expectations from the
guidance given in March.
Chairman Ted Arkel said while Noel Leeming, Warehouse
Stationery and financial services were all performing in line
with planned profit expectations, that was not the case with
the Red Sheds and Torpedo7.
As a result, the group had revised its guidance down to a
reported profit of $59 million to $62 million from the
previous guidance of $67 million to $71 million.
The Red Sheds had been affected by unusual and sustained warm
temperatures in autumn and winter.
''As a result, while sales in the Red Sheds are still above
last year, sales of seasonal apparel and home products are
below plan and are increasingly having to be sold at
decreased margins to maintain seasonal sell-through and avoid
Over the past three weeks, there had been ''a material
deterioration in sales and margin versus the group plan'' in
the Red Sheds, Mr Arkel said. It was likely the remaining
winter season would see discounted trading in the market with
limited opportunity for full margin sales.
The market conditions added further unpredictability to the
remaining June and July trading environment.
Torpedo7 was at an early stage of its plan to be a leading
multichannel outdoor adventure sports business, he said. The
integration of R&R Sport, No 1 Fitness and Shotgun.co.nz
had been well managed. But the integration effort had
resulted in sales not yet reaching planned short-term levels.
''The revised guidance is representative of a particularly
difficult seasonal trading environment.''
The reshaped group had developed a stronger base and
opportunities for growth. In the next year, the focus would
be on consolidating the changes, Mr van Arkel said.
Craigs Investment Partners broker Chris Timms said the 10%
downgrade in profit guidance was significant and showed how
important it was to have the right mix of products to offset
effects of poor seasons.
Temperatures in the north of the North Island were still
around 17degC to 19degC and Dunedin had not been hit by much
bad weather so far, he said.
''This has happened in the past but now The Warehouse has
multiple channels and is not only relying on clothing,
although they still have Torpedo7 to deal with.''
There appeared to be no problem getting people through the
doors, as sales were up, Mr Timms said.
The problem was having to discount products to get the
Shares in the group were sold down heavily after the
announcement, before rebounding slightly.
Australian-listed electronic retailer JB Hi-Fi was another
caught up in a spending slowdown, he said.
The company had not been immune from the well flagged
deterioration in consumer spending. It was pleasing the tight
guidance range set 10 months ago should be met and he
expected sentiment to lift which should improve the trend.