Circling back here. https://announcements.nzx.com/detail/404808
A bit sneaky dropping this on the 29th December, when they've done the update on the 7th of Jan last few years.
Must be real bad.
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Circling back here. https://announcements.nzx.com/detail/404808
A bit sneaky dropping this on the 29th December, when they've done the update on the 7th of Jan last few years.
Must be real bad.
Not good.
If only this wasn’t painfully obvious ages ago.
The WHS thread together with the retail thread over the last year make for rather interesting reading.
Really bad
H1 Gross Profit $s about the same as pcp but CODB up $25m means PBT down $25m
H122 PBT was $68m so H123 about $43m
Disaster stuff
Off course most people are on holiday so you wont see an immediate reaction to the share price but it deserves to go under $2. What are the forward prospects?? Like I've said over and over they need to abandon themarket.com that's a huge drain on the overall profitability of the group and there is zero upside to come from that after years of over investment in the platform. Its 2023, any retailer worth their salt have their own selling platforms, why do they need to be with an aggregator that's going to cannabilize sales at a huge commission.
Mr Orr will be happy that his medicine working ...leading indicators are looking ominous ...which shud be actually good for sharemarkets in next few months ...let market catch up with this theme ...it takes time to wake NZ market participants as they keep looking for clues from overseas without realising that our rates started going higher much earlier then others so we shud be reaching inflection point sooner ....June onwards it will be clear to all ...imo
Guess its not a counter cyclical staple.
Didnt get to 5 bucks last xmas and certainly didnt hit 7 this year either.
So H123 sales going to be about $110m more than H122
But after all that effort they make $20m less after tax ...$26m before tax.
Increased sales impact $38m additional margin all gone from reduced margin %. That much improved margin they gloated about over last couple of years all gone.
And then costs up say $25m
Npat will be about $30m ...not much eh
Reduced margins and increasing costs not a good combo
Lower NZD chickens starting to come home to roost? Feeding through to higher COGS (hence deteriorating GM).
SMT will be keeping their fingers crossed that the rebound in the kiwi (from Oct) continues.
A wee bit sure but the full fx impact on cogs/gp% still to come in my view
At the end of september they noted they were 69% hedged (circa 8 months forward cover) at 67c, so that crucially covered the Q2. The uncovered position would have hurt no doubt.
But if they stayed true to their fx hedge policy they would have been taking forward positions in the mid and high 50c range, locking those rates into cogs in about 8 month time. I’d imagine many tranches of cover at varying rates (both good and bad) rather than one bulky purchase (like what pumpkin patch did during the gfc).
Spot fx is 64c so in any event the fx outlook for the WHS (and other retailers) likely to get worse on a realised effective basis for about the next 8 months on the back of these cover mechanics.
The erosion in gp more likely due to mix of product (more nil margin groceries) and eroding gp margins as part of the down cycle. Previous 2 years had very high sell thru with minimal need to discount, that has reversed. As volumes fall tiered based rebates fall and increase cogs.
Will be interesting to watch inventory and stock turn. A true warning sign in retail is when retailers at the end of a cycle keep buying high levels to obtain rebates which causes further issues down the line. An interim provision for stock obsolescence usually provided at half year.
Nice one FTG and FM. Those USD rates in the second half of this year were a right pain for importers. Do we know the min/max for the WHS FX policy? In my experience when rates go South as they have, companies tend to meet the minimum requirement and take their chances on floating rather than lock in losses.
It also depends on the stock turn of the relevant items. Longer stock turns allows more time to jack up prices and recoup higher input costs. One needs to be on the ball much faster regarding costs and pricing for items with a much shorter stock turn. I can't imagine they will sit on their hands for long to wear margin erosion due to NZD/USD fluctuations.
As you say FM, the mix of sales will likely by a significant contributor where they have been selling relatively more of the lower margin products, as evidenced by the various grocery anecdotes. Not an easy task juggling prices and margins in this environment. High stock levels (if any) may also be a function of longer lead times and shipping disruptions over the past 24 months - some businesses had to increase safety stocks greatly to stay in business, albeit with some cashflow and storage pain.
They could headline the half year result announcement - Record first half sales for Warehouse Group
I’m not au fait with WHS’ hedging parameters other than what is in my post. Probably some notes in the AR or investor relations page.
But I totally agree with you in that when there are sudden swings in fx best laid plans are set aside or managed at bare limits. Above plan / mega purchases at spikes and de minimus purchases at lows. Probably depends a bit on the personalities involved and governance structures and how keen the board are at staying in line with board mandated hedging policies and I could only speculate how that dynamic plays out here
But being hedged at 67c during Q2 pretty respectable. Thats a level retailers can work with. But if they took out cover which I reckon they did that’ll be a headwind for the remainder of the year, as will the spot rate, relative to the last few quarters.
Good point re stock turn and fx relation. Redsheds has a v high stockturn and is their highest margin brand. Probably requires the most cover. T7 the lowest stockturn by memory.
Anyway thats it from me - a road trip beckons.
The idea that WHS (mainly Red Sheds) are counter cyclical is a fallacy. What punters think should happen and what does happen in reality are poles apart.
Red Sheds sales tend to underperform total NZ retail sales in ‘tougher’ times …..during GFC was best example
People won't give up their KFC though.. the poor chickens don't get a break.
RBD could be another value play ?
This latest trading update is a timely reminder for us that most, if not all, the WHS Group members operate in the 'high volume, low margin' sandpit. Put simply, The Red Sheds, Stationery, The Market, and for most product categories at NL & T7, operate as 'price takers', rather than 'price makers'.
I also ponder on whether the Red Sheds deciding to re-enter the FMCG sector (but only really tinkering at the edges at this stage?) is WHS just chasing another 'Nirvana mirage'? Once again the SMT thinking the easiest & fastest route to grow top-line is by 'being all things to all customers".
The financial health of a 'High Volume, Low Margin' enterprise tends to be very good when volumes are strong & growing (of course, a key caveat being that good operational & financial management disciplines are in place). However, once these 'price taker' enterprises find themselves in the position of sales starting to flat line, or worse falling, then look out!
Certainly not predicting WHS's demise, as they have been through a few economic cycles now, so one would expect them to be battle ready.
But success is not assured either. Retail is a cut throat industry and can't be run on auto-pilot.
J.C Penney, Nordstrom, Sears, Stein Mart.....
Wouldn't FX exposure valuation movements be provided for in each period though .. rather than being delayed
until later when the forward cover is used/applied for purchases ?
Volatility in rates could result in larger inter-period gain & losses in FX position valuations IMO
If I'm not wrong a deteriorating rate move in valuation of end of period cover should be being booked in each
reported period, including interims
In any case the market didn't seem to like the announcement, closing -20c (-7.14%) @ $2.60
1st quarter sales up 21.2% on pcp
YTD sales to December up 6.4% on pcp
If momentum continues through January wonder what 1st half sales growth will look like
They obviously think it’s going to be a +ve number because gross profit $s are going to be about same even gp% is down.
Supply chain issues, sourcing issues, particularly with a Covid avalanche up in Asia will continue to feature
Domestic economic pressures similarly - wage increases and increasing costs also will likely feature going ahead
Medium term light at the end of the tunnel or digging a deeper trench ? ;)
More or less depending on how they account for fx. And thats the point - with stock purchased at previously higher fx rates than spot, and cover at 67c again well above spot and the the prevailing rage through the quarter, the company benefited in this period from hedges. As you say, the poor result could even include unrealised gains on the fx contracts, masking the even worse underlying result
As previous tranches of fx are ustilised the weighted average hedge book could temporarily dip given purchases in the 50c and low 60c range (before eventually rising again). Now that the kiwi has climbed a bit to 64c and if it keeps climbing a bit you could actually see unrealised losses in subsequent periods due to the ineffectiveness of hedges. Still a good thing having the kiwi climb 100%. I almost always look at results excluding unrealised gains and losses on fx and derivatives for this reason.
Something wrong at Noel Leeming methinks
Might have been bright star a few years ago but sales now not much ahead of pre-covid levels
Maybe the WHS ‘culture’ has finally caught up with Noel Leeming …where doing OK is great and the ability to do their own thing has been taken away from them ….sucked up by the the fantastic ecosystem Nick has created.
Sounds like some alterations are needed to the colonel's original recipe.
50% chicken, 50% other.
I posted this back in 2004 -
Amazing that WHS price is still the same as it was 5 years ago
Imagine some poor fella called Sid who went bush for 5 years in November 1999 happy that his WHS shares were $3.80 and came out today and found they were still about $3.80.
Sid asked his sharebroker what has happened to the WHS over the last 5 years - his sharebroker told him
**** Store numbers have increased from 87 to 351
**** Sales are nearly 2 1/2 times what they were - increased from $0.9 billion to $2.2 billion
**** Net assets have more than doubled - from $170M to $357M
**** Now have 15,877 empoyees - 10.262 more than 5 years ago
**** Spent $500M on capital expenditure
So Sid replies 'Thats impressive, they must be making heaps now'
Oh no his sharebroker told Sid - their profit has only increased from $54M to $61M in those five years ... and the earnings per share has gone from 19cents to 20 cents.
Poor Sid - he's incredulous. All that investment and all those extra staff and they are only making the same as they were 5 years ago.
Who does he blame? He can't blame investor sentiment because WHS is still trading at 20X earnings - it hasn't been rerated downward. Sid says to himself that is just as well as if they had been rerated down they might have only been worth $2-$3. At least he still has his capital and he has had a few piddly dividends put in his bank account but inflation has taken care of those.
Sid asks his sharebroker 'Have the WHS really stuffed up somewhere along the way?'
Sid's sharebroker tells him 'No not really. They are investing for the future and all should be right in few years and your WHS shares should be worth $10 each in 5 years'
Sid thinks thats good and decides going bush for another 5 years might be the caper
What will Sid's sharebroker tell Sid when he comes back to civilisation in 5 years time?
And followed it up a few months later -
Sid's brother died and Sid came out of the bush for the funeral. While at the funeral he asked his sharebroker how his WHS shares were going ... must be heading back to $10 by now he asked.
No the sharebroker told Sid .. they are actually worth about 20% less than when you came out of the bush last November
But don't fret said the sharebroker. They are changing the way they do business in NZ, going to go into groceries and think that Woolworths coming into NZ could be good for everybody. The shareprice will go back up to the old heights of old ... it just keep keep going down down down ....
And Sid has gone back to the bush happy as Larry his nest egg is going to grow ....
Stories are important. Here are some other companies you could write much more moving stories about: FBU, RYM, ATM, SML, ANZ, KMD, TRA. They all went down (some more, some less) in a 5 year window.
And actually - based on my highly unscientific method to check the trend based on the first 12 companies which came into my mind (and yes, I had some great punch yesterday ...) it looks like 58% of the companies went down and only 42% up in the 5 year window.
Here are the winners of this tough contest: SPK, CNU, PEB, HLG, GNE
Who would have thought?
Anyway ... WHS hunting in the pack, but clearly above average. This is good :t_up:
Mr Winner…. a man of your knowledge and experience and the producer of cool charts …it doesn’t strike me as Whs shares would be one you would own….but might be one you would trade?
I felt sorry for Sid..broker sold him a pup. I’m sure he asked to grow his nest egg whilst he was in the bush…particularly as interest rates rose from 5 to 9 % for the first 5 years he was in the bush!
And Sid has gone back to the bush happy as Larry his nest egg is going to grow ....
Since the markets are closed today…we need to look at alternative asset markets to grow wealth today… If Sid is not in the bush he could go all in on Race 5 Te Rapa …I notice there is a horse called Nest Egg running in Race 4…must be a sign.
A quick peruse of the field I found some other horses that could represent the whs share performance since 2004.
Race 5: sea the light
Race 9: white noise
Race 10 civil unrest
I just hope Sid doesn’t get too excited and try and make up for his poor financial return and go all in
on
Race:3 Bitcoin
Remember Sid:
Gamble responsibly…only bet money you can afford to lose.
In short the answer is "yes" plus what FM said.
Hedge accounting is complex, but in a nutshell with a falling NZD vs USD relative to the original transaction date, unpaid FX bills at the end of a reporting period (like year end or half year) will be revalued upwards for a loss. Any related FX cover will have the opposite effect to give a gain. How much of the loss is covered by the forward FX contract gain depends on the contract FX rate relative to the spot rate for the reporting period end, and the percentage of the bill that was covered.
Hedge accounting further complicates matters in that effective vs ineffective cover can end up in different parts of the P&L. I believe this is what FM is referring to when he talks about ignoring some hedge accounting adjustments in comprehensive income.
Absolutely it could. But where you have perfect cover (as in with cross rates and FX $ values) then the effect should be zero. Perfection is impossible, hence there are usually residual gains and/or losses. For instance partial hedging results in some exposure to FX rate fluctuations -> gains and losses. Full hedging often comes at a cost, especially if you want to have a strike rate closer to what you want like a budget FX rate. So either it way it hurts - there is no escaping the higher cost unless one *gambles* with excess cover in the good times. But even when FX rates were very high (and good for importers), often the forward rates can be lower than you want....so it's hard to lock in such contracts in the expectation you have picked the top of the cycle and you *might* use the cover.
Correct.
Edit: BUT FX revaluations can be (mostly) solved if an importer pays the FX bill up front ASAP and is not exposed to an unpaid bill. There is then plenty of opportunity to look at unit pricing before the stock arrives on-shore. Trade finance facilities are often used by importers to pay for such purchases and can either be kept in foreign currency (which adds FX exposure) or converted immediately to NZD thereby locking in the spot rate of the day. It's a juggling act.
Perky …Nest Egg is in Race 4 and a good bet I reckon ..currently $10 so good value
The insiders (owners/trainers etc) apparently agree and are into it big time ….they tell me insiders buying is a good sign
Cheers
Perky ..you like a Craig’s guru analyst …tempting punters into havingba go
So today as place odds quite good some multis (all up for initiated)
Bitcoin 2.20 / Nest Egg 2.70 / Sea the Light 2.30 / White Noise 2.70 / Civil Unrest 6.40
$10 Multi on all 5 possible return $2,360
And on the first 4 (no civil unrest) $369
And one leaving Bitcoin out
Could be a good day
Perky …well Bitcoin sone motherless last …… performed just like BTC over the last year
That Bitcoin didn’t jump at the gate and ran last all the way…probably buy it at paknsave petfood isle next year for 99 cents a can.
Nest egg..Sids original pick….tried hard in a close race.
I lost $1 on an each way on the egg..I did it for Sid.
So at this stage Sids investment in that donkey called Whs on the NZX still looks good.
At least he still owns it.
With the market shut I’m trying alternative investments..I have no idea what I’m doing soa bet in $1 amounts as an entertainment value I’m prepared to lose.
Put my $20 into TAB and after race 4 im worth $27.10 plus a bonus bet. Got a $16.10 trifecta on race 3. If I was smart I could quit for a 30% return
The guru punters who do the race picks are having a shocker..there’s always a roughie sticking it’s nose in the race where it’s not wanted.
Horse racing is crazy…I much prefer the share market:scared:
If I have anything left by Race 10 ..I’m all on Civil Unrest…a likely macro economic trend for 2023.
https://www.nzherald.co.nz/business/...BOFEA5Y35EXJA/
The Warehouse Group cops downgrade in ominous sign for sector
(Premium)
Looks like one of our favourite brokers has sharpened the scalpel ;)
And Jarden goes UNDERWEIGHT
BusinessDesk reports
Investment advisory firm Jarden has downgraded its rating for The Warehouse Group from neutral to underweight following a Christmas slump.
In an update published on Monday, analyst Guy Hooper said sales momentum slowed over the holiday period, with group sales falling 5.5% compared to the eight weeks to December the previous year.
With rising cost pressures and dampened consumer confidence, Jarden was forecasting a 4.4% decline in year-on-year sales over the remainder of the 2023 financial year.
Shares in the group dropped 7% on Dec 30 after it disclosed its quarter two results, ranging from a 1.3% drop in sales for The Warehouse to 11.8% for Noel Leeming.
The Warehouse Group shares were trading at $2.63 on Monday morning.
Taking into account factors like earnings guidance and consumer confidence, Hooper revised down the 12-month target price for the shares from $3.15 to $2.45.
“In our view, [The Warehouse Group] is most exposed in the sector to a broader slowdown given the degree of operating leverage in the business and its net debt balance.”
FM - RetailWatch data for December month came out today
Would have to say the numbers are pretty gloomy looking - core sectors down v December 2021 and verall sales only up from travel and entertainment things. Even clothing was down
I did the old comparison to 2019 trick -- even then the % increases are pretty small when you think it's over 3 years
Jeez. ...... hope Nick getting really worried
They said a few weeks ago Noel Leeming sales were DOWN 11.8% compared to the same period last year — basically Nov/Dec period
JB HiFi have just reported their Q2 NZ were UP 9.8% on pcp. (That's Oct/Dec period)
Seems JB HiFi taking Noel Leemings to the cleaners.....gaining big chunks of market share
Should Nick be worried?
Didn't a Noel Leemings man go and join JB HiFi —— hmmmm
https://www.nzherald.co.nz/business/...OVS5B5U27KML4/
Warehouse Group proposes cutting 190 jobs in Auckland
Quote:
The Warehouse Group has confirmed “approximately 190 roles” will be cut across its six retail brands in Auckland in a restructure proposal announced yesterday.
They said these roles are part of their support teams based in Auckland and will not affect retail staff.
The move is a response to “challenging market conditions” forecasted for the year ahead and comes after Stats NZ released inflation figures at their highest in 32 years.
The company released a statement today regarding the restructure:
“Yesterday we shared a proposal with The Warehouse Group team members based at support offices in Auckland, to make some changes to our structure.
There you have it - even a bargain is challenging in the current difficult economic times ;)
Stakeholders will be waiting to see what sort of bargain they get dealt .. if they haven't already exited ..
in the same note
Forsyth Barr analyst Andy Bowley said the impact of Costco was a factor.
“It’s just one factor. The macroeconomic environment is the much larger challenge,” Bowley said.
Bowley and colleague Margaret Bei cited weakening consumer demand, margin pressure and continued higher costs of doing business in a January 5 research note.
“Christmas sales were below our expectations as revenue fell across all brands (from -1 per cent to -12 per cent) for the second quarter period from November 1 to December 26.
“While this is off a strong base, as the comparable prior year period benefitted from post-lockdown pending, the year ahead looks to be increasingly difficult for retailers.”
guess same issue's will become apparent for many retailers as yr goes on
Construction of the Warehouse in Wanaka is well underway - believe the scheduled opening is April sometime. Noel Lemming coming, but have had a Torpedo7 for a long time.
Dunno where they are going to get the X number of staff to run it - I understand Warehouse pay the living wage, but still may struggle for staffing.
k mart results were impressive up 113% , having a effect on whs ?
Haven’t heard from WHS since the sad story put out just after Christmas
Half year result next Thursday..wonder what’ll be
Last they told us was H123 Gross Margin $s broadly in line with pcp but CODB and depreciation to be $20m-$25m higher.
H122 NPAT was $48m so that ‘guidance’ suggests H123 NPAT will be around $32m ……down 33%
Hope it’s no worse than that because being 33% down is pretty bad
But no worries as Market Club membership must be approaching 1 million by now ….that’s cool!
Got to get past the auditor too by looks:
Quote:
The Warehouse Group Limited (“Group”) is pleased to advise details of an audio teleconference following the announcement to the NZX of the Group’s unaudited results for the half year ended 29 January 2023
Please note that the interim results release date has been updated from Tuesday, 21 March 2023 to Thursday, 23 March 2023.
Will it be a dividend flagged or here's a few cents to make do with on the fly job ? ;)
Nothing misleading about about results having to get past the Auditor - BP
WHS stated that it was unaudited .. some outfits even have the checker of the figures
have a look at interim reports as well :)
Did something get to your morning coffee without you noticing ? :)
It is sad ... instead of acknowledging your mistake you are just doubling up. Trumpesk.
Instead of continuing to spout nonsense I suggest you just show us a handful of NZX listed companies who you think get their half year results audited. I doubt you will find many (or any), unless they just changed their reporting period or have some other special reason.
The legal requirement as well as the NZX requirement is clearly an annual audit. While their is no law against more frequent audits, shareholders should clearly complain if any company is doing that without good reason more often, because it is a pretty expensive and time consuming exercise.
In case you don't find any I suggest you apologize and withdraw. Easy as that, no need to continue spreading misinformation.
WHS results out on the 27th .. a few days before they have to do it
But I do admire Briscoes …always get their results out pretty quick …this year the 15th
Probably an indicator of relative performance in most areas of each operations.
FBU pretty good as well …..mid month and not end of the month
Only a few more minutes till we see how bad the losses from the market will be…. i predict bad.
Sales are up - thats nice......:scared:
https://www.nzx.com/announcements/408784
• Sales growth to $1.8bn – up 4.8% on prior period1
• Gross profit $592.4m – a decrease of 1.2% from $599.6m in prior period
• Gross profit margin 32.7% - down from 34.7% in FY22 H1 due to category mix andincreased promotional spend including MarketClub
• Cost of doing business increased 3.5%, but reduced as a percentage of sales comparedto FY22 H1 from 31.4% to 31.0%
• Unusual expenses of $6.3m in relation to restructuring
• Reported Net Profit After Tax (NPAT) $17.4m - down 60.9% against Reported NPAT of$44.4m in FY22 H1
• No interim dividend declared. Dividend decision reserved to year end
$16m half year loss for market & $6.5m for torpedo7. Thats a half year loss
Real disaster eh Bob
Even back to ‘normalising’ result doesn’t help
AND NO DIVIDEND …….that’ll piss many off
heading back under 2 ?
Can someone please explain to me how you can have $14m of unallocated loss across the business units? how can anyone actually say what units are profitable and unprofitable?
Very scary read if you look at it from an economic point of view.
The average kiwi has started to pull back on spending. And the Warehouse Group managed sound very concerned where it is all heading.
this headline today sums it up
Rising living costs set to 'significantly dent household budgets', economist says
https://www.rnz.co.nz/news/business/...economist-says
February sees record high for rent prices across Aotearoa - Trade Me
https://www.newshub.co.nz/home/money...-trade-me.html
is it the economy or is it Kmart, Farmers and co just killing WHS..?
WHS is doing to themselves what WHS did to the backbone Mums and Dads small retailers through N Z over the last 30 years, is there any hope for WHS , not when you look at the shi! that they sell , its a cash flow retailer as imo most of their product does not last very long !!
Customers spent all their money in Costco. None left for Warehouse.
Also competing for the discretionary dollar with the likes of KFC and McDonald's. As prices go up, the dollar does not spread as far.
You have a model right there with Walmart, all that needs to be done is copy and paste.
With tightening budgets the warehouse should actually be doing much better. Nick needs to shape up or ship out.
Well, yes - his body language on the supplied photo (arms crossed) looks a bit defensive, doesn't it?
While sh*t happens, and ERP implementation always costs more than planned ... one still wonders why e.g. Torpedo 7 pulled the short straw when Kathmandu is doing so well (I know, the world is their oyster, but still ..).
Noel Leeming sort of lost traction as well. Not sure I've been in one of them over the last 6 months, but they never seem to have what I am looking for. On the other hand - bought some IT stuff last year using the market, wondering why they don't make money with that ...
Warehouse Group used to have for a long time one lame contributor under their roof (WHS Stationary), but it appears they are now breeding them. Not good, unless they can sell their sick puppies ...
Overall: times are tough and it always costs money to invest, but still start to wonder whether they use shareholders money in the best way they could.
Nick, do you listen?
Seems to be the Warehouse everyone gets a bargain except the shareholders.
Management seems asleep at the wheel.
The company isn't making money and going backwards by the looks.
The market is an interesting concept. They are trying to direct traffic to the site. But there is this thing called the internet, or more specifically Google. You can type in a search for what you want, so why be bound to just one site. From I can gather there is no real price differential from buying from their site to another other.
I think it was setup at a time when building ecosystems was popular to replicate the success of likes of Alibaba and Amazon. They are now trialing the sales of perishable goods (I'm thinking there is alot of wastage). Personally I think they need to look at the average shoppers shopping list, focus on the non perishable items and decide whether pricing and the number of items warrant a shoppers second trip to them(perhaps they are already doing this). I do think they have abit of an identity crisis at the moment. It doesn't help economic factors are putting pressure on margins.
Not trying to be negative. Just an observation.
My family buys alot of stuff from NL and T7.
Service is usually pretty good and prices competitive.
Only ever pop into the WH if the kids are grabbing a sports drink or the likes.
Good Company. But like every business out there. It's tough with inflationary pressures everywhere.
It was at a time where amazon/alibaba were seemingly unstoppable and it was only a matter of time before they (amazon) were setting up here etc etc.
But instead of getting better at what they do to protect market share, theyve shot themselves in the foot trying to be a mini amazon, to the tune lf $30-40 million bucks a year.
Biggest own goal IMO
Update 29 Dec 2022:
https://www.nzx.com/announcements/404808
Quote:
29/12/2022, 5:08 pm MKTUPDTE
The Warehouse Group – FY23 Q2 year to date trading update
The Warehouse Group (“the Group”) has today provided a trading update for the FY23 second quarter period to date from 31 October to 26 December 2022.
On 11 November the Group announced FY23 Q1 sales up 21.2% compared to FY22 Q1. For the FY23 Q2 period to date from 31 October to 26 December 2022 total Group sales have decreased 5.5% compared to the same period in FY22. (The comparable period was an unusual trading period in FY22, as Q1 and Q2 sales were impacted by COVID-19 lockdown levels which were in place from 18 August 2021, with Auckland the last region to re-open stores from 10 November 2021).
FY23 sales for the Q2 period to 26 December 2022 by brand:
• The Warehouse sales were down 1.3% compared to the same period last year
• Warehouse Stationery sales were down 9.2% compared to the same period last year
• Noel Leeming sales were down 11.8% compared to the same period last year
• Torpedo7 sales were down 8.5% compared to the same period last year
Year to date Group sales in FY23 were $1,506m compared to $1,414m in the same period in FY22, an increase of 6.4%.
Group gross profit margin for the FY23 Q2 period to date was down approximately 300 basis points compared to the same period in FY22. Year to date Group gross profit margin in FY23 is down approximately 200 basis points on the same period in FY22.
The Warehouse brand continues to bear most of this decrease due to the continued strength of lower margin grocery and the current mix of seasonal sell through. Increased promotional activity has also impacted margin, in particular due to purposeful investment in the Group’s MarketClub membership programme, which has now generated more than 900,000 active members.
“With cost of living pressures impacting discretionary spend, we are focused on providing the best value essentials for Kiwi families at the lowest prices,” said Group CEO Nick Grayston.
“We’ve continued to see the relative strength in The Warehouse as customers seek out value, however we haven’t had sales momentum across our other brands. We’ve seen softer trading at Noel Leeming after a strong couple of years and some categories like bike and water at Torpedo 7 have not performed at the level we would expect at this time of year.”
“For FY23 H1 we expect gross profit dollars to be broadly in line with FY22 H1, however cost of doing business (“CODB”) including depreciation, to be $20m - $27m higher than FY22 H1. The higher CODB and depreciation largely reflects the investment in core systems and digital platforms the Group is currently undertaking and will continue to be monitored relative to trading conditions.”
The Group’s FY23 half year result will be released on Tuesday 21 March 2023.
Nztx .. you’d have to say the half year result is actually worse than what they alluded to in that Dec update
In analysts call Chair Joan said final dividend being considered …but reading between lines one not be forthcoming.
Exactly. It's a huge investment and unfortunately can't see any payoff.
To be fair other outfits have been trying to apply this approach. I think Woolworths and CBA in Oz were trying and I think still are. Perhaps the difference I'm guessing is the strength of balance sheet.
It's not the Warehouse banner (Redsheds) that is impacting the group results - it's just all the other 4 divisions lol (stationary, NL, TP7, the markets). First half group sales growth of 4.8% doesn't sound too bad at the headline level, but given 1Q FY22 was lockdown impacted (and naturally 1Q FY23 was up significantly in year on year % terms) it's not a flash result, and in my view Q2 this yr vs last yr much more indicative of underlying trends as both clean results.
Red continues to travel okay but momentum really slowed in the 2nd quarter (sales per ave. store up only 2.6%, negative real growth). Blue down 5.6%, NL down 5.9%, and TP7 down a whopping 18.2% (remember when it was argued these were consumer staples lol)
Predictably enough tp7 has reverted back into loss making mode. Was surprised they continue to grow the store count, even adding 1 during the quarter. The worry with these expensive store roll outs is when they struggle to make coin when things are booming, and then revenue starts falling, is you are left with a large and sticky overhead base....rents and wages continue to rise from inflationary pressure, but your volumes are down which in turn reduces the rebates you get (driving cogs up), increases promotion costs and inventory obsolesce costs. Following the traditional retail cycle stores then need to get closed and expensive to exit leases. All these things compound each other at the bottom line.
Personally think it's madness to persist with the whole markets venture. Even from just a human perspective, those losses could underwrite people's jobs if they didn't persist with it, let alone the shareholder perspective.
Big change in net debt, woeful cashflow.
The ugly results that I had anticipated are arriving in earnest, which I take no satisfaction in for shareholders or effected staff.
340 jobs to go.
Themarket.com reported a loss of $16m in the half year. Lost $25m in fy22, $21m in fy21, $15m in fy20 and $6m in fy19.
Paying a lot to try be Amazon NZ. When do you give up? If they turned it off then they wouldn’t need to cut their cloth.
Also have you seen the amount of staff on above 200k, it’s about 160 people. I need to get in to retail!
I've never really been able to work out The Market. I'm not a genius, but I'd like to think I'm not an idiot either. All it seems like to me is a poorly advertised, not-so-good Amazon with the same stuff that you find in The Warehouse (and other group stores including the dumping ground that is 1 Day) but sold through a different channel and brand.
Am I missing something? Certainly if the Market disappeared tomorrow I wouldn't miss it. On the other hand, I buy heaps of stuff from Amazon.com because even with shipping and tax it's cheaper than buying here.
In terms of Noel Leeming, anecdotally the last few times I've gone in to the stores in my area they have all been quieter than I have seen in the past. Lots of staff twiddling their thumbs and not doing much.
The Warehouse/red shed is the only group brand I really like, primarily because the big one near my house will often have some decent deals on large packs of baby wipes, dog biscuits (I blend the cheap sawdust kibble with the wallet-wounding, Ebos shareholder-enriching Blackhawk stuff from Animates - the hound loves it) and massive bags of house brand coffee beans for cheap ... if you drink it straight out of the espresso machine while it's boiling hot you can't notice the average taste and it still perks you up. The fresh fruit and veg area in the store looked very sad though.
yeah, and about ~55 over 300K as well. I wonder what they all do?
Attachment 14520
Make powerpoint presentations and use words like omni-channel
ChatGPT can do both now virtually free.
I think you do.
We do live further away from the next red shed ... and the market allows us to get not just everything you could buy in the Warehouse, but as well plenty of other stuff for no added cost (with membership and a minimum order of $50). Most orders (from NZ/ Australia) arrive within one week (sometimes next day), sure - orders from India / China / UK take longer.
Hardly buy anything physical from amazon (we do buy e-books from them) - but anything they need to put into a parcel takes ages to arrive and the cost for P&P are substantial.
It is possible (and we use them) to get through the market plenty of useful and reasonably priced goods from the e.g. the UK, China, India, without the need to worry about dealing with somebody in a foreign jurisdiction and without the need to worry over taxes / import and goods arriving (though admittedly - if its from overseas it sometimes takes as well its time) - the market is the only point of contact and actually they track the goods coming from overseas for you.
I found it good value - and good service ... but admittedly (like just now) when the Warehouse splits an order of $56 into two separate parcels and delivers them for free (as part of the membership), then I am sometimes wondering, how they can make money this way.
In summary, I do see customer groups for whom the market can be quite attractive ... but I think as well that they would need to review their processes to make sure the market makes them money instead of costing them money.