Shares in The Warehouse immediately fell over 7% after the New Zealand stock exchange (NZX) opened this morning in response to the retailer's less-than-positive trading update over its second financial quarter.
Total group sales for The Warehouse’s second financial quarter – the busiest time of year for the retailer – are down 5.5% due to cost-of-living pressures pinching consumers' wallets.
In an update on the NZX yesterday evening, the retailer said that while The Warehouse's sales were down 1.3% compared with the same period last year, its other brands had seen sales drop much further.
“We’ve continued to see the relative strength in The Warehouse as customers seek out value, however, we haven’t had sales momentum across our other brands,” group chief executive Nick Grayston said.
Warehouse Stationery's sales were down 9.2% compared with the last financial year’s corresponding period. Appliance and electronics retailer Noel Leeming's sales fell 11.8% and outdoor adventure store Torpedo7's sales were knocked down 8.5%.
“We’ve seen softer trading at Noel Leeming after a strong couple of years and some categories like bike and water at Torpedo 7 have not performed at the level we would expect at this time of year."
Year-to-date group sales in FY23 were up 6.4% to $1,506 million compared to $1,414m in the same period in FY22.
Group gross profit margin for the second-quarter period was down approximately 300 basis points compared with the same period in the 2022 financial year.
The year-to-date group gross profit margin in FY23 also fell about 200 basis points compared with the same period last year.
Grayston said The Warehouse brand had continued to bear most of this decrease due to the continued strength of lower-margin grocery and the current mix of seasonal sell-through.
“With cost-of-living pressures impacting discretionary spend, we are focused on providing the best value essentials for Kiwi families at the lowest prices."
Cost of doing business
The Warehouse still expects the gross profit dollars in the retailer’s first-half results of the 2023 financial period to be “broadly in line” with last year’s corresponding period.
However, the cost of doing business (CODB), including depreciation, was expected to be between $20m to $27m higher than in the first-half results of FY22.
“The higher CODB and depreciation largely reflects the investment in core systems and digital platforms the group is currently undertaking and will continue to be monitored relative to trading conditions,” Grayston said.
The Warehouse’s half-year result for FY23 will be released on March 21.
The retailer’s weaker second-quarter update followed first-quarter sales in the 2023 financial period jumping to $764.7m, up 21.2% from the previous corresponding period.
When the market opened this morning, The Warehouse was down 7.9% to $2.58 – down 22 cents from yesterday.