Online sales help The Warehouse as directors' fees increase

Warehouse Group CEO Nick Grayston. Photo / Jason Oxenham

The Warehouse has revealed the impact of recent Covid trading restrictions on its business, noting a 14.6 per cent sales decline in the three months to the end of October.

Speaking at the company's virtual annual meeting today, chief executive Nick Grayston said group sales for the first quarter were $630.7 million, with core Red Shed sales down 21.4 per cent.

The good news was that online sales have surged due to lockdown, resulting in growth of 118.2 per cent and representing 30.1 per cent of group sales.

Grayston said the reduced sales due to the lockdown resulted in a build-up of winter seasonal stock, requiring increased clearance sales and a gross profit margin of 32.9 per cent, down 2 percentage points from the same quarter last year.

"There has also been a change in product mix with the limitations of lockdown shopping," he added.

The NZX-listed company operates The Warehouse, Warehouse Stationery, Noel Leeming, Torpedo7 and TheMarket.co.nz.

Directors' fee increase

At the meeting, shareholders voted on an increase in the total director's fee pool - from $900,000 to $990,000 a year. The last time fees had been increased was in 2013.

Directors Antony Balfour, John Journee, William Easton and Rachel Taulelei were re-elected to the board.

The board is also implementing a new policy requiring directors to hold a minimum number of shares in the company, which can be acquired over five years, said chair Joan Withers.

"Earlier this year, PwC was engaged to provide an independent benchmarking report on non-executive director fees in comparable companies," she said.

"Based on the results of this review, the directors have concluded that an increase in the total fees payable to directors is justified and appropriate."

In September The Warehouse posted a record net profit for 2021 with total sales up 7.6 per cent to $3.4 billion as customers took to online shopping and splurged after the first Covid lockdowns.

The retailer reported a statutory net profit of $117.7m in the year to August 1, 2021, up 164 per cent on the previous year's $44.5m.

A breakdown of sales in the first quarter of this financial year showed:

• The Warehouse recorded sales of $298.2m in the quarter, down 21.4 per cent on the same quarter last year, and online sales growth of 164.1 per cent.

• Warehouse Stationery sales were $48.2m, a decline of 22 per cent, and online sales grew by 91.8 per cent compared to the same quarter last year.

• Noel Leeming sales were $238.7m, a decline of 4.8 per cent, however these sales were up 6.1 per cent compared to the same quarter in FY20. Noel Leeming online sales saw growth of 148.5 per cent with strong uptake for the company's our one-hour click and collect service.

• Torpedo7 recorded sales growth of 1.2 per cent to $34.2m compared to the same quarter last year and more than 43 per cent growth compared to FY20 due to growth in both in-store and online channels. Torpedo7 online sales increased by 73 per cent compared to the same quarter last year.

"As we have moved into level 3, step 2 in the second quarter, our group stores in the Waikato traded 30 per cent up year-on-year in the first week as customers returned to shopping in-store, and our Auckland stores have traded significantly higher than this," Grayston said

Group-wide total sales demonstrated growth of 19 per cent in the second week of the quarter – of which Auckland stores were open for half of this week, Grayston said.

Earlier this month the Warehouse confirmed a requirement for all staff to be fully vaccinated.

Two-thirds of employees have taken up a $100 incentive aimed at getting the entire workforce vaccinated before the business' vaccine mandate comes into effect on January 16, 2022.