By Jenny Ruth
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Thursday 25th November 2010 |
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The Warehouse Group's first-quarter results were disappointing and it has been losing market share to rivals such as Briscoe's and specialty stores over the last few quarters, says Nachiket Moghe, an analyst at Aegis Equities Research, which is owned by Morningstar.
"We'd like to point out that Briscoe probably benefited from the inclusion of the busy Labour weekend trading this quarter," Moghe says. Briscoe's same-store (stores open more than 12 months) sales were up 6.1% in the same quarter and it has out-performed The Warehouse for the past few quarters.
"We think The Warehouse will have to lift its game in order to win back customers. It needs to work on product quality and store presentation in our view. Shoppers are happy to pay a little more at rival outlets than shop at the Red Sheds."
Until it addresses these issues, The Warehouse will continue to lag its traditional rivals, he says.
The Warehouse reported first-quarter Red Shed sales fell 1.5%, impacted by a 9% year-on-year decline in CD and DVD sales, while its stationery store sales rose 2.9%.
Moghe says because of this result, he has cut his forecast net profit for the year ending July 2011 to $84.5 million from $87 million previously.
Recommendation: Hold.
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