By Jenny Ruth
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Wednesday 13th January 2010 |
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The Warehouse's report of flat sales for the first nine weeks of the second quarter shows "penny-pinching Santas ruin Red Shed's Xmas," says ASB Securities analyst Florian Burch.
The flat outcome was at odds with management's expectations that sales in the Red Sheds division would continue to grow steadily over Christmas.
"Management's comment that ‘we believe our sales are indicative of the broader non-food retail market overall' is in line with our feeling that general shopping activity leading up to Christmas was tepid and still characterised by occasional heavy discounting of the kind that has been widespread among major chains over the last 12 to 18 months," Burch says.
While the stationery division showed some improvement with sales up 3.5% in total and up 4.7% on a same-stores basis, that growth only claws back part of the 9.4% sales drop in the year-earlier period.
Burch says the profit update - management is expecting net profit for the six months ending January 31 will be similar to the $56.8 million it reported in the previous first half - has led him to tweak his revenue and margin forecasts for the Red Sheds downwards.
He now expects the company to report an $87.7 net profit for the year ending July, down from his previous $89.3 million forecast.
BROKER CALL: ASB Securities investment rating for The Warehouse Group is marketperform.
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