Christmas environment challenging - Warehouse

By Phil Boeyen, ShareChat Business News Editor

Friday 30th November 2001

Discount retailer The Warehouse (NZSE: WHS) says the current Christmas trading period has a 'challenging backdrop' but adds that the company is well positioned to cope.

Chairman Keith Smith outlined the season's trading update to shareholders at the company's annual general meeting on Friday.

"As I state each year, the Christmas trading season is a critical part of the sales and profitability for the group," he says.

"The tragic events of September 11, together with the Ansett Australia and Air New Zealand (NZSE: AIRVA) woes and the reported impact on business and consumer confidence will provide a challenging backdrop to this year's Christmas season."

However Mr Smith says The Warehouse, with its strong brand, value for money proposition and low cost structure is "well positioned to meet that challenge".

The chairman also had some brighter news from the company's Australian operations, where he says customers have responded above expectations to the new store format.

"As new stores are opened, and as the merchandise range is enlarged and improved, we are seeing a move towards destination shopping and increased weekend trading- visiting The Warehouse for its own sake with faith in the merchandise quality and range - as we experience in NZ.

Mr Smith says the company opened 10 new or replacement stores in the three months ended October and all of them are trading significantly ahead of budget.

"The average sale per customer in Australia ranges from only $A10.70 in the old stores to $A14.73 in the new Warehouse format stores; that compares with $A22.58 in The Warehouse NZ."

Despite the financial focus on Australia, which has so far produced disappointing results, Mr Smith reassured shareholders that the company remains firmly focused on continuing to grow the NZ business.

"This continues to be the main value driver of the company while repositioning and transforming the Australian stores from their current bargain format to a discount variety business, similar to The Warehouse concept in NZ."

New Zealand's best known retailer has also shrugged off moves by Kmart Australia to cut prices and says its Warehouse Australia stores have not been adversely affected by the challenge.

However the move does signal that Kmart's owner, Australian retail giant Coles Myer, is taking the bargain retail market seriously. This includes New Zealand, where it has recently recommitted itself to the stores in this country and is beginning to advertise more aggressively and has extended trading hours.

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