Daily ShareChat: The Warehouse Group

The Warehouse Group's Red Sheds are holding their own in a difficult market but the performance of the Blue Sheds stationery chain "is beyond disappointing and should prompt management to review its strategy," says Sarndra Urlich at First NZ Capital.

The retailer reported third quarter sales were down 2.8% with Red Sheds' sales down 1.5%, reflecting the discontinuation of the Extra formal. Same-store Red Shed's sales were up 1% on the same quarter a year earlier with the company saying soft consumer demand was offset by market share gains.

However, Blue Sheds' sales fell 10.4% with same-store sales down 9.9% with the company noting difficult conditions in the stationery and office products sector and even worse conditions in the big-ticket technology, office equipment and furniture categories.

Urlich says the third quarter Blue Sheds' decline follows a 10.9% drop in second quarter sales and a 5.6% fall in first quarter sales as well as declines in all four quarters the previous year and declines in two quarters in 2007.

The Warehouse is expecting that, bar any material adverse change in trading conditions, adjusted full-year net profit will be in line with last year.

Urlich is forecasting adjusted net earnings of $83.7 million for the year ending July, down from $84.1 million last year but rising to $93.5 million in 2010.

BROKER CALL:  First NZ Capital rate The Warehouse Group (NZX: WHS ) as UNDERPERFORM

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