KEY POINTS:
Improved sales at The Warehouse have come at a price as profit margins have fallen, the company says.
Sales results for the third quarter show group sales were $412.3 million - up 6.7 per cent on the same quarter last year. Financial year-to-date sales were $1.36 billion, up
3.5 per cent on last year
Chief executive Ian Morrice said yesterday the Red Sheds had stronger consumer demand than the soft third quarter last year, but growth had come in low-margin categories such as books, CDs, computer games, Easter products and health and beauty.
As well, summer clothing lines and outdoor furniture had been heavily discounted to achieve sales.
"The late summer meant that sales in seasonal categories were strong in this quarter, later in the season than last year, but at reduced retail prices," Morrice said.
Discounting was also evident in the stationery stores where the 7.2 per cent increase in same-store sales came from "clearance activity necessary to reduce inventories".
Morrice said the company was still on track to achieve a full-year net profit of $96 million.
Forsyth Barr analyst Guy Hallwright said strong sales and heavy discounting had been a trend in retail.
"Certainly the story I'm hearing around most of the retailers is that the slow start to summer meant the stuff that would have sold earlier in the season has hung around till later in the season and therefore they've brought prices down to improve it.
"I suspect what it means is although sales look a bit stronger, profit is not really moving."
Earlier in the week, Briscoe Group blamed the late arrival of summer and the delayed onset of winter for forcing it to discount summer stock to make way for winter merchandise.
Briscoe's first quarter sales were up nearly 20 per cent on last year but the increase did not boost profits.
The Commerce Commission is reviewing applications from Woolworths and New Zealand food co-operative Progressive Enterprises to take over The Warehouse.
The decision, which has been delayed three times, is due on May 25.
Hallwright said potential buyers would be looking past the seasonal variations, but yesterday's result was not good news. The Warehouse shares closed up 2c at $6.77 yesterday.
The figures
* The Warehouse Group has reported third-quarter sales up 6.7 per cent to $412.3 million.
* Same-store sales are up 5.8 per cent for the Red Sheds and 7.2 per cent for Warehouse Stationery.
* The group is on track to achieve full-year net profit of $96 million.
