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Online sales, red shed shoppers key to Warehouse’s $57 million profit

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New Zealanders’ growing reliance on smartphones is changing the way retailers do business, The Warehouse Group’s chief executive says.

The retail giant has reported a net profit after tax for the year of $57.1 million, down nearly 6 per cent.

Retail sales were up 4.6 per cent to $2.77 billion across the group, which includes The Warehouse, Warehouse Stationery, Noel Leeming, Torpedo7, R&R Sport, No.1 Fitness and Shotgun Supplements.

Chief executive Mark Powell said the biggest change in shopping habits over recent years had been the rise of smartphones.

Online sales totalled nearly $150m annually, up from $18.8m in 2011, and all the company’s brands were online offering either home delivery or ‘click and collect’.

Powell said people tended to think about online retailing just in terms of sales, but it had much wider implications.

People would do their research online and were now much better informed consumers, he said.

“It puts pressure on retailers but that is not a bad thing, either.”

He said consumers’ “shopping journey” had changed. Instead of looking at brochure that arrived in their letterbox and going in store to buy what they wanted, they might look at a brochure, then do some research online, order on a site and then go into the store to collect their shopping.

They would also be exposed to advertising material online and via social media.

Powell said: “We’ve gone from virtually not being in the online space to being New Zealand’s leading digital retailer.”

The Warehouse had to keep up with changing buyer behaviour, and respond more quickly than its competitors.

MIXED PERFORMANCE

The Warehouse stores and Warehouse Stationery were the standout performers for the year.

The Red Sheds reported their 18th consecutive quarter of sales growth, with operating profit up 3.5 per cent.

The  company said the recovery was helped by strong growth in the home and apparel categories, which made up for the decline in sales of CDs, DVDs, gaming and books.

“This is reflective of the ongoing ‘House of Bargains’ and ‘Home of Essentials’ strategy in Red. This strong second half trading result was also helped by favourable winter temperatures. The focus is now very much on profit leverage through ‘better products and better prices’ to drive sales growth, and cost and working capital control.”

Other brands  did not deliver so well.

The group said Noel Leeming’s focus on people and services allowed it to differentiate itself in a competitive market.

But its operating profit dropped by 43.2 per cent to $6.4m this year, partly due to one-off rebranding costs.

The Torpedo7 group, including R&R Sport, No1 Fitness and Shotgun Supplements, went through significant change and rebranding in the year. Its profit dropped to just above break-even.

The Warehouse’s leap into financial services was also a drain on its finances. It is to launch a new credit card before Christmas and has developed a hire purchase product.

But the company said the $1.8m loss the financial services business created was in line with expectations.

The group announced a final dividend of 5 cents per share, bringing total annual dividend to 16cps.

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