The Warehouse Group has suffered a 19 per cent fall in profits for the first half of the financial year.
Total profits came in at $46.2 million, despite group sales rising by 1.7 per cent to $1444.7 million.
Mark Powell, The Warehouse Group CEO, attributed the lower result to softer trading performances in the company’s Red Sheds and Noel Leeming chains.
“The trading performance was impacted by a late start to summer seasonal trading and cycling of the Digital Switch Over (DSO), affecting sales in the entertainment and consumer electronics categories,” said Powell.
“The result was also negatively affected by a number of planned one off non-recurring costs relating to strategic investments. These included the rebranding of both Noel Leeming and Torpedo7. The inclusion of Diners Club in the results, which contributed a modest but planned EBIT loss, affected comparable performance in the half as Diners Club (NZ) was acquired in March 2014.”
The Warehouse’s Red Sheds reported sales of $928.7 million for the half, an increase of 0.9 per cent, or $8.6 million compared to the same period last year.
Same store sales also increased 0.9 per cent in the half.
Second quarter trading was impacted by a cool spring season and a late start to summer requiring additional promotion and discounting.
The strongest categories for the six month period were home, leisure, outdoor, consumables, and a new range of Schooltex products, however, these were offset by a decline in entertainment , with the decline in DVDs and CDs compounded by a decline in TV sales with the DSO cycling.
Online sales were the jewel in the crown, growing 30 per cent in the second quarter.
“The multi-channel bricks and click model is proving highly competitive with click and collect purchases now representing 20 per cent of online sales,” said Powell.
“The Warehouse had a challenging half. With the store investment program now largely complete the focus will be on continuing to drive sales growth, while improving productivity to gain profit leverage”.
The Warehouse Stationery, or Blue Sheds business saw an increase of 2.4 per cent for the first half to $124.4 million.
Noel Leeming sales were $330.4 million for the period – an increase of 0.5 per cent, with the softer sales performance and increased costs associated with rebranding of the chain.
“After the rebranding Noel Leeming is now well positioned to consolidate its market leading position and translate that into profitable growth.”
Torpedo7 saw the strongest growth, with sales up 34.2 per cent to $64.2 million. This reflects the first full half of operating with the combined R&R Sports, Shotgun Supplements, and No 1 Fitness businesses, which were all acquired in the first half of the 2014 financial year.
Torpedo7 was rebranded during in the first half of 2015, launching a new look webstore, converting R&R Sport stores, and opening three new stores in Albany, Mt Wellington, and Taupo.
