Warehouse customers love low prices but Christmas sales fall
Thursday, 11 January 2018
New Zealand retail giant The Warehouse took a financial hit during the most lucrative period of the last year.
On Thursday, the company reported a 2.8 per cent drop in sales during the 'critical' Christmas trading period in 2017, compared to the previous year.
Warehouse Group chief executive Nick Grayston said this followed the company's decision to focus on low prices and digital sales as Amazon swooped into the Australian market.
The 'radical shift' from 'Hi-Lo' pricing to 'Every Day Low Price' pricing, as well as a one-time reduction in ranges and consequent clearance sales, resulted in lower average selling prices, he said.
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'[However], customers' reaction to the pricing changes and product improvements have been very positive,' Grayston said.
'We continue to invest in technology and build out the team to execute the next steps in our change programs.'
Despite the difficult Christmas trading period, year-on-year sales were up 5.1 per cent, with transactions rising 2.9 per cent.
'While we are all keen to start delivering the benefits of our transformation, we have a long way to go, but these are encouraging signs,' Grayston said.
The Warehouse Group owns The Warehouse, Warehouse Stationery, Noel Leeming, and Torpedo 7.
Noel Leeming continued to perform strongly, while Torpedo7 had been steadily improving throughout the year, Grayston said.
Warehouse Stationery sales were expected to drop 6.5 per cent for the period between December and March.
This came down to the 'softer performance of communications and technology segments', as well as the one-off impact of the integration of the Warehouse Stationery business onto The Warehouse operating systems, he said.
The group's interim profit forecast for the end of the first half of the financial year is between $32 million and $35m, which is between 22 per cent 28 per cent down on the same period last year.
However, this was likely to be a one-off as it was due to the a change in staff incentive structures.
Take that out and the performance was likely to be similar to the previous first half, Grayston said.
'Many of the operational impacts on profit performance are transitional in nature and not expected to recur,' he said.
The Warehouse Group includes 93 Warehouse stores, 79 Noel Leeming stores, 70 Warehouse Stationery stores, and 11 Torpedo7 stores.
The company had turnover of $3 billion in the 2017 financial year, and employs more than 12,000 people.