KEY POINTS:
A fourth successive quarterly drop in same-store sales has highlighted a worrying trend for The Warehouse.
Group results released yesterday for the first quarter of 2007 showed overall sales up by 1.6 per cent to $382.4 million and sales excluding Warehouse Stationery up by 1.5 per cent.
Chief executive Ian Morrice said results reflected "patchy but overall flat consumer demand" for the three months to October 29.
But what was not highlighted was the fact that the sales increase was due to expansion and new stores including the Sylvia Park complex.
Same-store sales - which compare results with stores in operation at the same time the previous year - were actually down by 1 per cent on the same period in 2005.
This is the fourth fall in a row for quarterly same-store sales and the eighth fall of the past nine quarters.
"The Warehouse has not had a significant rise in same-store sales since the fourth quarter of 2004," Guy Hallwright, of sharebroker Forsyth Barr, said.
"The negative results have become smaller but they are still negative. The latest result shows the company is still in a difficult position."
Hallwright said that public perception about The Warehouse had become distracted because of speculation about prospects of a takeover by Woolworths Australia. The tough trading environment was taking a backseat to the booming share price which reached up to $7.05 on Friday.
Share prices fell 7c yesterday on news of the sales figures to close at $6.92.
The last increase in same-store sales was at this time last year when discounting on surplus apparel stock led to a small increase of same-store sales of just 0.2 per cent.
The second quarter of 2006 was down 2.3 per cent, the third down 1.7 per cent and the fourth down 0.3 per cent.
The last significant increase in same-store sales was for the fourth quarter of the 2004 financial year, which was up by 4.2 per cent, and that was followed by four successive falls.
Macquarie Investments analyst Warren Doak said the falls were small and had to be seen in the context of margins being up because there was less discounting.
"The Warehouse may well have been able to improve sales by discounting like Briscoe Group. But instead opted to improve its margin. It is just a different approach."
Announcing the quarterly result yesterday, Morrice said that the Red Shed made up $331 million of sales for the group that totalled $382 million.
Morrice said: "We achieved good sales growth in our brown goods [such as electronics] and grocery categories in line with trends by other retailers."
He said first-quarter conditions were mixed.
"I remain confident it is well positioned for the critical second quarter with our strongest offer yet."
The results also illustrated a more widespread softening of the retail market, Doak said.
"Christmas is key and at the moment nobody has a real feel for how it is going to go."
The Warehouse did not release any results that indicated the performance of its Warehouse Extra Grocery operation at Sylvia Park.
