Daily ShareChat: The Warehouse Group

By Jenny Ruth

The Warehouse Group's third quarter sales, which were down 1.9% on the same year-earlier quarter, were very disappointing, particularly those of its flagship 'Red Sheds', says First NZ Capital analyst Sarndra Urlich.

The Red Sheds' sales were down 2.6% in the quarter and same-store (stores open more than 12 months) sales were down 3.6% (down 3.3% after adjusting for the timing effects of last year's 53^rd trading week).

"The trouble with the Red Sheds, in particular, is that its performance is not only weak but that it is cycling weak comps," Urlich says.

"While poor performance in the context of a recessionary backdrop is excusable, it is somewhat frustrating to see sales weaken even further in the current environment."

The positive story from the results, the 'Blue Shed' stationery chain whose sales were up 2.2% in the quarter with same-store sales up 11.2% on an adjusted basis, contributes less than 5% of aggregate earnings, Urlich says.

"Relative to its peers, The Warehouse looks somewhat expensive from an earnings multiple perspective, particularly when you consider its lacklustre earnings potential," she says.

However, until Australia-based Woolworths, which owns xx% of The Warehouse, "categorically denies its interest in The Warehouse, we believe the stock will not be sold down to any great extent."

BROKER CALL: neutral.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Printable version

Related News

Warehouse cuts profit guidance
Warehouse expects annual net profit to fall about 8%
Warehouse sales rise during Rugby World Cup period
Powell aims to reverse slow decline at Warehouse
Warehouse posts 8.9% drop in FY profit before items, forecasts weaker 2012
Daily ShareChat: The Warehouse
Daily ShareChat: The Warehouse
Daily ShareChat: The Warehouse
Daily ShareChat: The Warehouse
Daily ShareChat: The Warehouse

Get quotes for The Warehouse Group Limited Ordinary Sha (WHS)

NZX Annoucements for WHS