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Patience needed for Aussie Warehouse acquisitions

By Phil Boeyen, ShareChat Business News Editor

Friday 24th November 2000

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The Warehouse (NZSE: WHS) has told its shareholders they should not expect to see significant returns for the first two years from its new Australian operations.

Chairman Kevin Smith told The Warehouse AGM this morning that sales at the new acquisitions - Clint's Crazy Bargains and Silly Solly's - are running below plan, and that Christmas trading is expected to be difficult for the Australian retail sector.

However Mr Smith says the company does expect to see acceleration in growth of store size, sales and profits after it has built capacity of the various teams within the 115-store Australian chain.

"In many respects, including merchandise and business-systems, the Australian operation is recognisable as The Warehouse of about seven years ago."

"Having studied a number of growth options, the Board viewed the Australian acquisition as providing our best source for significant growth and value in the medium to long term. This value will be built on sharing The Warehouse expertise in logistics, property management, information technology and merchandising with Clint's and Solly's."

When the discount retailer released October quarter sales figures recently, same-store sales in New Zealand rose just 4.4% and were the lowest since the Asian crisis.

Mr Smith says the company has value for money price points, and is well placed to compete for the shrinking consumer discretionary dollar, but the impact of a slow-down in both trans-Tasman economies can't be quantified until early next year.

"With the Christmas trading season such an important part of our sales and profitability, we will not be in a position until we release our quarterly sales figures in early February to predict the effect of both the Australian and New Zealand economies on our half yearly performance."

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