Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Warehouse warning raises concerns about strategy, purchases

By Tina Morrison

June 25 (BusinessDesk) - Warehouse Group's profit warning last week, which erased $94 million from the retailer's market capitalisation, has raised concerns about the outlook for both its core business and the success of its acquisition strategy.

The company's shares have shed 8.1 percent since it announced on Friday that profit this year would be lower than it previously estimated as it cuts margins to boost sales of seasonal winter stock at its core 'red shed' stores which have been crimped by warmer weather, and after sales and profits lagged forecasts at its Torpedo7 unit.

Warehouse, New Zealand's largest listed retailer, is in the process of rejuvenating its 91 'red shed' stores, which account for about 70 percent of sales. To expand group earnings, the company aims to grow the 'non-red' side of its business to be as large as the 'red sheds', having bought 11 businesses in 18 months, adding technology and appliance retailer Noel Leeming, outdoor sports chain R&R Sports and online sporting goods retailer Torpedo7.

"The downgrade creates concern around the core business and future earnings growth," Forsyth Barr analyst Chelsea Leadbetter said in a note. "Red Sheds has been a repeat offender behind recent downgrades despite significant capital invested in the store base."

Auckland-based Warehouse acquired a 51 percent stake in Torpedo7 in April 2013 and has since raised its holding to 80 percent. Since Warehouse first invested in the business, Torpedo7 has acquired online fitness equipment retailer No.1 Fitness, online sports supplements company Shotgun Supplements and outdoor sports apparel and equipment chain R&R Sport.

"Integration of new acquisitions does take time, however missing sales targets at such an early stage of Warehouse ownership does trigger concern," said Leadbetter. "There remains considerable execution risk for Warehouse's Torpedo7 division, as earnings and sales growth is still unproven."

Forsyth Barr has an "underperform" rating on Warehouse stock and Leadbetter downgraded her earnings expectations for the coming three years by 12 to 13 percent following the profit warning.

The company's stock recently traded down 1 percent to $3.05.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news