Big hopes for small(ish) Warehouse store

Warehouse boss Ian Morrice is confident a change of season will boost sales. Photo / Natalie Slade

The Warehouse today opens its first new Auckland store in four years, hoping winter will hit soon and banking on the Avatar effect to help accelerate the group's sluggish climb out of the recession.

The store opposite the St Lukes shopping centre will carry most of The Warehouse range within a "compact" 2000sq m building.

It is the part of a 15-store renovation and expansion throughout the country over the next five years, adding to the existing 86 stores.

The company had been trying to find premises in the popular retail area for almost 10 years, chief executive Ian Morrice said.

"It's an important store for us to see the extent to which we can get the majority of our range into quite a small space which is quite a challenge."

The group reported flat adjusted net profit in the six months to the end of January - up 0.4 per cent to $57 million on revenue which slipped 0.5 per cent to $918.9 million.

Share of the the $19 billion non-food retail market has fallen since rapid store expansion ended in 2004 and some analysts have said the company has performed poorly against competitors coming out of the recession.

Morrice said while some specialist rivals such as Michael Hill, Briscoes and Pumpkin Patch were starting to show much more rapid growth, this was off a low base.

"There was a huge adjustment during the recession when people stopped spending at some of the specialists and spent more in discounters like us. Coming out of recession they're spending more than they were last year there [at specialist competitors] but some of our dollars are going there."

He did not believe this was part of a structural shift in the retail market.

When releasing its latest result last month, the company said it expected only a gradual lift in sales.

Morrice yesterday said in this half there were signs consumers were starting to spend again. "The trend we're picking is that there's a gradual recovery taking place."

Apparel makes up about 35 per cent of sales and like other retailers Morrice said he was hoping for a quick end to the Indian summer and to take back market share from specialists.

Clothing and shoe sales were up 6 per cent during the last full year but competitors have fought back.

"We've not been able to hold our sales - we know our offer has got room for improvement."

The CD and DVD market was down significantly during the last six-month period, because of downloading and the absence of big releases.

However, with the release of blockbusters such as Avatar next week, it was hoped to turn this round.

"We're picking that this will be the biggest DVD release in New Zealand. Those categories are not all that significant for other retailers but they're significant for us."

The last Auckland store opening was at Sylvia Park, a Warehouse Extra with a floor area of 12,000sq m.

Coriolis Research retail analyst Tim Morris said since The Warehouse had practically saturated the New Zealand market, and having been burned by its forays into Australia and groceries, it was left with only incremental growth options. Market commentator Arthur Lim said as a discounter the company should have done better during the past two years.

Its share price, which yesterday closed down 1c at $3.81, had been largely propped up by anticipation of corporate activity, he said.

Morrice said he was confident of good growth in targeted categories such as jewellery and in online sales, which began last July.

"What we've signalled very clearly to shareholders is steady growth, not the gangbuster growth that we've seen in the early years."

NEW SHED

* The St Lukes store in Wagener Place is the Warehouse's 86th since it started in 1982.
* The store's size was partly determined by the availability of carparks - about 150.
* Opening deals include a number of channel set diamond rings down from $1999 to $699 and cameras down from $199 to $50.