An unseasonably warm autumn and early winter has resulted in an underperformance of The Warehouse's flagship Red Sheds Stores, according to Morningstar's equity research.
In an update released this afternoon, Morningstar reacts to a weak trading update from the retail giant, with revised figures released on Friday showing a decline on previously predicted values. Net profit after tax was revised to between $59million and $62million, down from the previous range of $67million to $71million for the 2014 financial year.
According to the update, a lengthy and unseasonably warm period leading into winter had affected trading at the Red Sheds stores resulting in a dip in company profit.
Morningstar reported that it expects trading conditions to continue to be challenging for the company into the first half of the 2015 financial year. This resulted in a reduction of the fair value estimate of shares in The Warehouse, from $3.60 to $3.40.
Despite the negative impact on the company's outlook, Morningstar stated that they maintained the view that The Warehouse's scale, at three times the size of their nearest competitor, gave them the ability to provide low-cost products and undercut competitors, as well as having high volume-related efficiencies and national scale.
