Warehouse looks to internet for sales boost

Mark Powell, chief executive of The Warehouse. Photo / Richard Robinson

The Warehouse says it is encouraged by a rise in online sales during the first half of its financial year.

The Auckland-based company - which is in the process of making its entire product range available on its website - says internet revenue rose 60 per cent on the prior comparable period during the six months to January 29 this year.

Chief executive Mark Powell said the lift in sales came off a relatively low base and was mainly the result of an increased number of items online. The company did not disclose its online earnings as that information was commercially sensitive, he said.

"It's a highly competitive area."

Powell said The Warehouse had doubled its online range during the first half of its current financial year, with 25,000 to 30,000 products now available.

The company, which has been placing increased emphasis on building its presence in cyberspace, plans to have its full, 40,000 item range available on the web by July.

Its efforts come as the internet places increasing pressure on traditional, bricks-and-mortar retailers like The Warehouse.

Online retail juggernaut amazon. com has reported sales of around US$48 billion ($58 billion) over the past year.

Powell said The Warehouse was also facing increased competition from online auction site Trade Me, which now sold a lot of new - rather than second-hand - products.

But the country's largest listed retailer was going to compete aggressively online, he said.

"Our strategy is to bring bargains and essentials to New Zealanders in any channel and not be defined by channel, so whilst we're looking to improve those bargains and essentials in our stores we're also looking to drive that online as well."

Big box retailers overseas, such as US giant Walmart, have offered a "click and collect" service that allows customers to buy products on the web and then pick them up from physical stores.

Powell said The Warehouse would not immediately introduce the service, but it was an option that was under constant review. He brushed off the suggestion that the company had been slow in moving into online.

"I think we're leading the way really, in general merchandise."

The Warehouse reported a slight increase in first-half profit on Friday, with adjusted net profit rising to $54 million from $52.3 million a year earlier. Same-store sales, which rose 2.7 per cent in the half-year, ramped up during the second quarter of the six-month period, rising by 3.1 per cent.

The company is in the midst of a $430 million capital investment programme aimed at returning The Warehouse to its former glory over the next few years through improving the external and internal appearance of its stores, property development and new sites.

Goldman Sachs analyst Buffy Gill said in a research note that while the retailer's earnings risk had moderated, structural headwinds remained including margin pressure resulting from online competition.

The Warehouse shares closed down 9c at $2.71 yesterday.