The Warehouse Group Third Quarter Sales Flat

The Warehouse Group Third Quarter Sales Flat

– Strategy is to offer NZ’s best bargains every day –

Auckland, 9th May 2005 – The Directors of The Warehouse Group Limited reported sales in the third quarter of $489 million, down 0.9% on the corresponding period last year.

Group sales year to date were $1.703 billion, also down 0.9% for the corresponding period.

Eliminating the Australian exchange rate impact, Group sales would have been 0.4% ahead of last year.

“The business has embarked on a long-term transition to its offer and format,” said Chairman Keith Smith. “Given our trading position at the end of the third quarter, and assuming no change to current trading conditions, we remain on track to achieve our earnings guidance,” he said.

THE WAREHOUSE NEW ZEALAND

The Warehouse New Zealand sales at $328 million showed a 0.9% increase on the comparative period, bringing year to date sales to $1.146 billion, up 1.7%.

The number of stores increased by five to 85 over a 12-month period. New store roll-out was a contributing factor to the sales increase, as same store sales were down 2.5%.

Strong growth continued in home entertainment and electronics, but the slow start to winter sales in apparel and winter seasonal products, as well as a disappointing Easter, contributed to the sales result for the quarter.

Group Chief Executive, Ian Morrice said, “We are still in the early phases of the implementation of our strategy announced in March to improve our customer offer, and we are making good progress. As customers start to see the benefits of lower prices all the time, we expect they will shop at The Warehouse even more often.” During April, the Price Rollback programme was launched. In the first few weeks, The Warehouse has reduced the price of over 1000 products to be New Zealand’s lowest prices. More products will be added to the Price Rollback list every week.

“New Zealanders see through weekend sales and one-off discounts,” Mr Morrice said. “We are now reducing prices across our range every day through Price Rollback, and our customers are noticing the difference.” As well as driving price leadership, The Warehouse is also focused on improving its future product offer and strengthening relationships with its supplier community.

Mr Morrice said, “The strategic supplier management programme launched in February is making good progress in re-establishing our competitive sourcing advantage.” During the quarter, The Warehouse increased its focus on store display standards. Mr Morrice said, “Although this is only a small step towards making our stores easier to shop, we have received very positive customer feedback.” The Warehouse’s store portfolio will continue to be improved with the opening of six replacement stores before Christmas 2005. The replacement stores at Hamilton Central, Te Rapa (Hamilton), Palmerston North, Upper Hutt, Lower Hutt, and Riccarton (Christchurch) will add more than 29,000 square metres of retail space.

THE WAREHOUSE AUSTRALIA

In Australian dollars, The Warehouse Australia sales at A$100 million were down 3% on the corresponding period, and at A$377 million, down 2.6% year to date.

Australian store numbers declined by one, to 124 in the 12-month period. Same store sales were down 4.9% for the quarter.

“Third quarter sales in Australia were within expectations based on our focus on improving operating margins, and we remain on track to substantially reduce our losses this financial year,” said Mr Morrice.

WAREHOUSE STATIONERY

Warehouse Stationery sales at $52.9 million were up 3.7% on the comparative period, with year to date sales at $149.6 million, slightly less than last year’s $150 million.

The increase this quarter was primarily a direct result of a positive sales performance achieved in the B2B (Business to Business) commercial channel. Excluding sales attributable to the B2B operation, same-store sales were 4.7% below the same period last year.

“While Warehouse Stationery benefited from ‘back to school’ sales falling into the third quarter rather than the second quarter, this was more than offset by lower sales of business machines compared to last year,” Mr Morrice said.

OUTLOOK

Mr Morrice said, “We expect the group to be well-placed as increasing pressures on consumers generated by rising fuel costs and increased mortgage payments hit the monthly household budget.” The Warehouse Group Limited expects its full year earnings to be in line with the earnings guidance issued in January 2005.

The full-year result for the year ended 31 July 2005 will be released on Friday 9th September 2005.

ENDS

Background: The Warehouse Group Limited

The Warehouse Group had sales of $NZ2.244 billion and profit of $NZ61.2 m for the year ended 1st August 2004. The Warehouse Group has 85 “Red Sheds”, 43 Warehouse Stationery “Blue Sheds” and 124 “Yellow Sheds” in Australia. The Warehouse Group employs more than 15,000 people across New Zealand and Australia.

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