New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Warehouse Group Limited / Equity Bottom-Up

The Warehouse Group 1Q21&nbsp;Sales Checkout


RESEARCH INSIGHTS


The Warehouse Group (WHS) has carried strong momentum into FY21, with 1Q21 group sales up +6.3% on the prior year period. Gross margin expansion was the key takeaway, and driving a slight increase to our FY21E earnings&nbsp;forecast.&nbsp;Recent sales performance and gross margin achievement provides greater confidence in the near-term outlook, and&nbsp;we lift our near-term dividend assumptions&nbsp;as a result. WHS offers an attractive&nbsp;6.0% net dividend yield, but with elevated economic uncertainty and ongoing business transformation, WHS carries execution risk.&nbsp;1Q21 sales results are encouraging, however, represent a seasonal&nbsp;low, with&nbsp;the critical Christmas trading period to come.


Trading momentum continues


WHS reported 1Q21 group store revenue of NZ$739m, up +6.3% on the prior comparable period, and largely in line with our expectations. All brands achieved positive same store sales (SSS, adjusted for Auckland temporary store closures), with top performers in 4Q20, Torpedo7 and Noel&nbsp;Leeming, carrying further positive momentum in 1Q21. Group gross margin was also encouraging, up c. +170bp on the prior comparable period, with less discounting activity amid heightened consumer activity.
At year end (FY20)&nbsp;inventory was down -24% relative to the prior comparable period, with consumer activity post-lockdown&nbsp;stronger than expected. Whilst inventory has been recovering, it remains below normal levels as supply chain congestion limits the ability to replenish. We suspect this is the case across the whole&nbsp;retail sector, meaning it is unlikely to result in lost market share. This should be positive for gross margin (less discounting), but may limit sales activity.


Divisional insights



Red Sheds&nbsp;—&nbsp;The toys, leisure and outdoor categories continue to deliver, driving 1Q21 SSS&nbsp;up +8.1%. Total sales increased +2.9%, with two store closures occurring during the period. Red Sheds has been a key driver of strong gross margin performance.&nbsp;
Blue Sheds&nbsp;—&nbsp;1Q12 SSS ticked up +0.5%, with total store sales falling -1.9%. Six more Warehouse Stationary stores were integrated within&nbsp;Warehouse stores during the quarter, taking the total integrations to 23.
Noel&nbsp;Leeming&nbsp;—&nbsp;Electronics and&nbsp;whiteware&nbsp;were key standouts in 1Q21, as consumer nesting&nbsp;spend continues. SSS growth of +9.1% is particularly&nbsp;impressive given it was cycling a strong prior period (1Q20 SSS +6.1%, boosted by&nbsp;Rugby World Cup streaming requirements). Total sales increased +11.5%, with one store closure during the quarter.
Torpedo7&nbsp;—&nbsp;Spend on cycle, outdoor, and&nbsp;watersports&nbsp;carried strong momentum into FY21, with quarterly SSS surging&nbsp;+39%. Total sales increased +42%. Torpedo7 was the only brand to record sequential&nbsp;quarterly sales growth.
E-commerce —&nbsp;Group online sales surged +58%, representing 11.3% of quarterly sales (7.8% in 1Q20).&nbsp;TheMarket&nbsp;performed "in line&nbsp;with [company] expectations".





Guy Hooper
guy.hooper@forsythbarr.co.nz
+64 4 495 5255




Warehouse Group Limited

The Warehouse Group: 1Q21 Sales Checkout