Warehouse Group’s first-quarter sales were weaker than the year-earlier period after the retailer changed the pricing strategy at its flagship “red shed” stores to “everyday low pricing”.
Sales fell 1.7 per cent to $645 million in the first quarter ended October 29, it said on Thursday.
The Warehouse discount department stores posted a 5.2 per cent decline in sales to $357.9m while Warehouse Stationery sales dropped 7.2 per cent to $59.1m.
In contrast, sales at its Noel Leeming appliance and technology chain lifted 6.3 per cent to $195.1m, while Torpedo7 sports goods sales increased 3.7 per cent to $39.2m.
“The reduction in first quarter Group sales was anticipated under the EDLP strategy in The Warehouse which continues to show encouraging results at gross margin level,” said Nick Grayston, Warehouse Group CEO.
“However, we were disappointed with the performance in Warehouse Stationery as it was partly driven by internal operating changes.
“Our attention is now on the critical second quarter trading performance, while continuing to advance our retail transformation strategy with urgency.”
Warehouse has embarked on a three-year strategy to lift profitability by removing the complexity and cost of an inefficient operating model and reshaping the company’s physical footprint to support the digital business.
Grayston said weaker sales at The Warehouse in the first quarter had been an anticipated effect from the company’s transition to the “everyday low pricing” model as it lowered prices across its ranges.
However, The Warehouse showed encouraging results at gross margin level, Grayston said.
Volumes of product sold increased 7 per cent, in part reflecting the success of its “dollar deals” programme for groceries.
Warehouse Group said its online sales increased 9.2 per cent to $46.6m from a year earlier, and now make up 7.2 per cent of all sales.
The company ended the quarter with 93 The Warehouse stores, 78 Noel Leeming stores, 69 Warehouse Stationery stores, and 11 Torpedo7 stores.
Its shares last traded at $2.10 and have shed 29 per cent the past year.
