Warehouse sales up, but Red Shed margins squeezed

The Warehouse chief executive Mark Powell. Photo / Brett Phibbs

Warehouse Group, the country's biggest listed retailer, boosted first-quarter sales 51 per cent as its Noel Leeming and Torpedo7 acquisitions added to revenue, though margins at its flagship Red Sheds brand came under pressure.

Group sales rose to $569.8 million in the three months ended October 27, from $377.3 million a year earlier, before it bought Noel Leeming and Torpoedo7, the company said in a statement. Sales growth in the Red Sheds unit, Warehouse's biggest, didn't translate into gross profit gains as CD, DVD and book sales declined and the stores went through major product range overhauls.

"In line with our strategic plan, the quarter has seen continued investment in our businesses and accelerated investment in new activities with three small bolt-on acquisitions, the launch of new online businesses, new multichannel offerings in the Warehouse such as Click & Collect and in-store Wi-Fi and the start-up of our DRTV business TV international brands," chairman Graeme Evans said.

"While we have seen positive sales results in our retail businesses in the quarter, we are incurring start-up costs as a result of all of these activities," he said.

Evans and fellow director Janine Smith will retire from Warehouse's board at this year's annual meeting as the retailer continues its transformation programme under relatively new chief executive Mark Powell, navigating through a tough retail environment and recovering some of its lost lustre after abandoning forays into grocery and Australia under its previous management.

The flagship Red Sheds unit lifted sales 8.8 per cent to $354.5 million in the quarter from a year earlier, and were up 5.5 per cent on a same-store basis, with better performances from its Auckland stores and strong growth in apparel, housewares, health and beauty, gaming, jewellery, consumer electronics and appliances.

The Blue Sheds stationery unit, which has been the group's strongest performer in recent years, boosted sales 10 per cent to $56.9 million, with same-store sales up 6.1 per cent.

The Noel Leeming unit contributed first-quarter sales of $139.2 million and Torpedo7 $19.2 million.

Noel Leeming increased its sales 12 per cent and same-store sales were up 6.1 per cent from the same period a year earlier, before Warehouse acquired the business.

The shares rose 2.4 per cent to $3.89 in trading yesterday, and have climbed 30 per cent this year, outpacing the 18 per cent gain on the NZX All Index, a capital measure of domestic stocks.