WHS - Warehouse Group

[Waltzing]

Yes but we think the number has been there for a while and is not new info. They had stated it clearly well before today and the BPS was blown out ages ago and now back on track according to the lastest numbers.

Surely you cant shut stores and expect your bottom line profit to continue on as per normal.

WHS has had a HUGE year of technology roll outs and they have HIT some major milestones that have gone un noticed.

Their technology platform work has been extensive and may well position them for the rebound from the hit over COVID if thats what it was.

A Short term hit to the bottom line.

the numbers were out there long before this.

The full profit and loss audited is needed to see where the cost lay. There is a huge series of developments in bringing all these changes into place and i think we stated before bringing the legacy systems into a group interconnected platform will and will have cost a lot of money..

At some point they have to take the hits to bring themselves into the modern world and the 2021 annual report detailed the huge changes they proposed and the time frame rolling out to late 2022.

If their next QTR is on track it will be so what. If they indeed take a hit from post covid spending then it will warrant a rerating.

They are sourcing from global supply chains and they need to track component parts from source and it will need in the future to be as clean and green as they can get it.

This is a period of big change for all these retail chains across the western world. Its a big job and the scale of the changes these companies must now undertake is not simple and does not go without an investment in technology and time.

Are we post covid? No and it may go on for a lot longer as AUS is now starting to look to reintroduce restrictions.

It isnt over yet.

[LaserEyeKiwi]

Quite a few critical posters in November calling me out as having lost the plot selling at $4.10. You were one of several. This is what I had to say back then

I called it very clearly as a SELL @ $4.10 in early October 2021 and anyone who listened is going to be very pleased indeed on Monday that they did. What's absolutely clear is they are not going to make anything like $126m in FY22 and broker downgrades will also be forthcoming.

My contention is that WHS is just a cyclical and last year we hit the peak of the cycle. Its all downhill from here.

“Above $40 million” NPAT guidance is slightly worse than i was expecting for HY22, but not far below my ballpark expectations given the lockdowns and the already previously given guidance from the first 3 months of trading.

You sold at $4.10 before the 17.5c dividend was paid Beagle, so the stock would need to fall to $3.92c for anyone who held to be worse off compared to those like yourself who sold at $4.10 pre-dividend. (That’s ignoring any further tax obligation costs triggered by a sale) That might happen on Monday, but I dont think their will be much in the way of carnage.

Also seems like you are stating opinion as facts with your thoughts about the spending spree being over, which is contradicted by the facts that WHS has grown group sales year over year over the last two months, even while Covid shopping restrictions have been in place (unlike the year ago period). At the very least their is no evidence yet that retail spending at WHS properties, or the retail market in general, has started to slump. In fact all evidence suggests the opposite with retail spending continuing to increase at both WHS and retail transactions economy wide.

Given the one off impact of Covid on these results so far, and given the best ever record sales of the last two months (“For the first two months of the second quarter, Group sales were up 2.3% on FY21 and 8.6% on FY20 sales for the same period”), I dont think the market will treat the stock that harshly. Having record top line sales in an inventory restricted environment is quite the feat, and not the sort of headline that would normally collapse a stock price, especially one already trading at such a low PE ratio.

Not sure why you are so negative on a rapidly growing online sales portal (themarket.com) - when you seem so positive on other companies growing their online portals as a big part of their future success (like HLG for instance) - can you flesh out why its good for one particular retailer to be growing its online sales platform, but bad for another to do the same thing?

WHS with themarket.com, combined with its other online brands (all powered by themarket.com’s underlying infrastructure) is now New Zealands leading online retail entity by number of customers - why do you suggest they shutdown the most popular online operation in New Zealand while it is growing faster than any other platform? That seems rather short sighted. What rational is there for NZ retailers to just give up and submit to Amazon before they have even arrived in New Zealand? Do you think Glassons should just shut down their online portal as well? I cant get around your reasoning on this particular subject? I’m completely with you on HLG boosting its online presence, so am confused as to why you have an exact opposite approach on another retailer who has significantly higher online sales also continuing to invest in its online portal.

Overall I think the most important takeaway is this: Despite Covid lockdowns, large inventory transport and COGS cost increases - Gross Margin and Revenue is higher than the comparable Pre-Covid period - which bodes very well for the post-covid period.

The Warehouse Group Trading Update

7/1/2022, 5:06 pmMKTUPDTEThe Warehouse Group reports positive Christmas sales, but COVID impacts remain
The Warehouse Group Limited (“the Group”) has today provided a trading update for the five months ended 2 January 2022.
On 12 November 2021, the Group reported that sales for the first quarter of FY22 were 14.6% below sales for the same period in FY21, with only 2 weeks of the quarter not impacted by the COVID-19 lockdown levels. Early in the second quarter of FY22 Auckland moved to Level 3 Step 2, which allowed the Group’s Auckland stores to reopen from 10 November and removed a significant trading constraint.
For the first two months of the second quarter, Group sales were up 2.3% on FY21 and 8.6% on FY20 sales for the same period. This brought total Group sales for the five months ending 2 January to $1,465.9 million, a decrease of 5.7% or $88.8m compared to the same period in FY21, which is an improvement on the position reported in the Q1 sales update, when sales were down 14.6% or $107.7m.
Gross profit margin for the first five months of FY22 was 55bps lower than the same period in FY21 but up 132bps versus FY20. A contributing factor to the reduction was the sudden increase in online sales which for this period increased 105% on the same period in FY21, to comprise 18% of sales. This has reduced gross profit margin through a lower margin product mix and higher freight costs associated with online sales, exacerbated by capacity constraints throughout New Zealand’s delivery network. Click and collect accounted for 50% of the online sales, which is an 89% increase on the same period in FY21.
The ongoing disruption to worldwide supply chains has made managing stock flow through the peak trading period challenging. The Group’s robust shipping and stock management controls have managed inventory levels while ensuring availability of key continuity and seasonal lines for customers. The Group is well positioned for the remainder of summer and Back to School trading periods.
Based on actual sales for the first five months of FY22 the Group expects Adjusted Net Profit After Tax (NPAT) for HY22 to exceed $40m. This compares to $111m in HY21 and $46.2m in HY20. The second quarter is expected to continue to trade at or slightly above the same quarter last year and this would result in sales for the half-year being circa $80m less than FY21. Other major impacts on HY22 NPAT versus HY21 include:
1. Cost of doing business is expected to be $35m higher in the half-year, reflecting higher store labour costs, increased investment in TheMarket and an increase in digital spend. It is also expected that there will be additional costs of $10m - $12m reflecting the COVID-related impact to operations
2. Gross Profit Margin in the first half of FY21 benefited from a $10m decrease in inventory provisioning from FY20 and reduced discounting.
Further detail will be provided with the Group’s FY22 half year results, which will be announced on Tuesday 22 March 2022.
ENDS

[Waltzing]

Yes Laser they have really taken on a big job and really not been given much credit for being bold Kiwis. When the Ikea's of the world turn up you cant just close down and roll over. Long way to go before local Kiwi business just says ok we sell out and close down. WHS and HLG and other's doing a great job giving NZ businesses to be proud of.

From the current info release you cant see inside the groups ledger to see the underlying profits versus impacted profits or the change cost of group technology platform developments.

WHS has been a technology leader for a long long time and has a big technology intellectual base to lever off and was an Amazon long before anyone else.

[winner69]

Nick in that interview in The Herald yesterday:

Q. What would you rate as your greatest success in business?

Nick. Moving The Warehouse Group to Agile - a new method of working.

Hmmm -- WHS not Agile enough to overcome challenges?

See's Operating Profit (adjusted of course) back to 2018/2019 levels - pre-Agile

[Waltzing]

WHS was agile from the get go!!

WHS was a leader in technology JIT right from the start and was a technology company and now is undertaking moving its GROUP into the age of full on line integration of MOBILE platforms to online. Its a leader in that field and always has been. Its technology base should not be underrated and no NICK agile was build into this company long before you arrived.


Dont under estimate the technology capability of this company.

[Rawz]

HLG sales first 20 weeks -10.14% vs prior year
WHS sales first 24 weeks -5.7% vs prior year

Retail is done! Quick- rotate out of retail.! Get to financials and construction!

But wait..

MHJ update in Dec; "Michael Hill delivered both sales growth and sustained margin expansion throughout November and December."

BRG; we haven't heard from them for awhile. One suspects an on par Christmas trading result or slightly up? That's what they do..

SP come Monday should be fine based on what the HLG SP did after their drop in sales update. Maybe WHS announced it at 5pm so people could get over the shock and not panic sell?

Conclusion: Some NZX retailers are executing very well in trying times due to excellent management and product range. It seems FMCG (fast moving consumer goods) which WHS an HLG sell is no good. Diamonds and food processors better.

Either way for me I wouldn't want to have money in WHS or HLG unless you were after the divvy. Its going to be a solid period of flat SP movement. HLG $7 magnet and WHS $4 magnet for 1-2 years imo

[winner69]

Try and dress it up all you want my friend but at the end of the day it doesn't matter how you try and slice and dice it ~ $40m is an absolute bloody shocker compared to $111m last year. The timing of the NZX release after market close is a classic attempt to disguise the bombshell.

Betcha you glad you sold your shares to Joan and Nick around $4.10

You did bloody well seeing you bought most of them in the low 200's a year prior .... well done

You made the most of positive sentiment towards WHS .... pity they are likely to disappoint the market again.

I think you'll be a shareholder again ..... when the price and yield are good enough. You've nailed it when you said WHS are back to making a steady $80m/$100m (adjusted of course) - then what price do you pay for 23 cents / 28 cents earnings and maybe 20 cent divie

[winner69]

WHS was agile from the get go!!

WHS was a leader in technology JIT right from the start and was a technology company and now is undertaking moving its GROUP into the age of full on line integration of MOBILE platforms to online. Its a leader in that field and always has been. Its technology base should not be underrated and no NICK agile was build into this company long before you arrived.


Dont under estimate the technology capability of this company.

Jeez - sounds like you do consulting work for them waltzing. Sharing in the zillions WHS have paid consultants over the last few years (never reported part of adjusted profit) ..... been a good gravy train for you eh

I do worry a bit when a couple of months I bought a TV in store at Noels place (none of this click and collect for me) and the nice lady punched some numbers into her phone and said 'tep we have 2 in stock' and 5 minutes later came back and said 'sorry, none in stock .... but you can take the display model'

Great tech - can't keep track of stock


But back on topic - when is NIck rolling out his metaverse stuff he keeps talking about

[mcdongle]

Originally Posted by mcdongle
With the amount of empty shelves in our local Warehouse and chatting to some staff about it. Do they have enough products to sell and make money?



Headlines a few weeks ago -

Warehouse boss not concerned about Christmas

So no worries


So i may have been correct..... Winner

[LaserEyeKiwi]

Originally Posted by mcdongle
With the amount of empty shelves in our local Warehouse and chatting to some staff about it. Do they have enough products to sell and make money?



Headlines a few weeks ago -

Warehouse boss not concerned about Christmas

So no worries


So i may have been correct..... Winner

Maybe you didn’t read the release yesterday? They reported record high sales over the last two months.

The negative part of yesterdays news was lower profits, not lower sales.