Surging Warehouse rewards investors

By Karyn Scherer

Delighted investors in The Warehouse Group have been rewarded with a special dividend, after one of the strongest growth periods in the company's history.

The retail group, which now includes 69 big red barns and 18 stationery outlets, has decided to reward shareholders with a one-off dividend of 18c a share, after chalking up a tax-paid profit of $37 million for its first half.

The amount is almost as much as the company made in the whole of the previous year, and has also prompted a doubling of the interim dividend to 13c a share.

More than 600,000 paying customers now pass through the group's stores each week. In the six months to the end of January, they spent $516.5 million - up 23 per cent on the same period a year earlier.

Even on a same-store basis, sales were up at its big red barns by 11 per cent, while stationery sales were up 32 per cent.

Investors have been eagerly anticipating the good news for some months. The company's share price has more than doubled since June, hitting an all-time high of $7.55 this week.

However, the result also marks another important milestone for the company - it has now overtaken the Farmers Deka group as New Zealand's largest non-food retailer.

Farmers Deka, which is a wholly owned subsidiary of Perth-based wholesaler and retailer Foodland Associated, recently reported sales of $432 million for the same six month period.

The result was a 3 per cent drop on the previous comparable period and The Warehouse confirmed yesterday it was still eating into competitors' sales. Its share of all department store sales has increased over the past two years by more than 8 percentage points to 38.3 per cent.

Managing director Stephen Tindall, who has been joined this month by his heir apparent, former Blue Star business supplies boss Greg Muir, has pointed to better stock control as one of the main reasons for the higher profits.

He conceded yesterday that the changes to parallel importing laws had been a gift for the company, but also pointed to a significant investment in information technology and emphasis on new categories such as garden products, appliances, clothing and mobile telephones as reasons for the strong growth.

Although its foray into pharmacies is still in its infancy, it plans to open up to five more by the end of the year. It is also eyeing other services, such as financial services and new retail formats, as possible areas for growth.

The company has also decided to spend $10 million expanding its North Island distribution centre in Wiri. Once completed, the centre will be almost twice as large as Auckland's St Lukes shopping mall, making it one of the largest buildings in the country.

Mr Tindall said he was optimistic the strong sales growth would continue, as sales since balance date had also been strong.