WHS - Warehouse Group

[nztx]

1st quarter sales up 21.2% on pcp

YTD sales to December up 6.4% on pcp

If momentum continues through January wonder what 1st half sales growth will look like

They obviously think it’s going to be a +ve number because gross profit $s are going to be about same even gp% is down.

Supply chain issues, sourcing issues, particularly with a Covid avalanche up in Asia will continue to feature

Domestic economic pressures similarly - wage increases and increasing costs also will likely feature going ahead

Medium term light at the end of the tunnel or digging a deeper trench ?

[Muse]

Wouldn't FX exposure valuation movements be provided for in each period though .. rather than being delayed
until later when the forward cover is used/applied for purchases ?

Volatility in rates could result in larger inter-period gain & losses in FX position valuations IMO

If I'm not wrong a deteriorating rate move in valuation of end of period cover should be being booked in each
reported period, including interims

In any case the market didn't seem to like the announcement, closing -20c (-7.14%) @ $2.60

More or less depending on how they account for fx. And thats the point - with stock purchased at previously higher fx rates than spot, and cover at 67c again well above spot and the the prevailing rage through the quarter, the company benefited in this period from hedges. As you say, the poor result could even include unrealised gains on the fx contracts, masking the even worse underlying result

As previous tranches of fx are ustilised the weighted average hedge book could temporarily dip given purchases in the 50c and low 60c range (before eventually rising again). Now that the kiwi has climbed a bit to 64c and if it keeps climbing a bit you could actually see unrealised losses in subsequent periods due to the ineffectiveness of hedges. Still a good thing having the kiwi climb 100%. I almost always look at results excluding unrealised gains and losses on fx and derivatives for this reason.

[Muse]

The idea that WHS (mainly Red Sheds) are counter cyclical is a fallacy. What punters think should happen and what does happen in reality are poles apart.

Red Sheds sales tend to underperform total NZ retail sales in ‘tougher’ times …..during GFC was best example

Agreed.

And some of the brands particularly Noel Leeming, TP7, and some of the subcategories at redsheds arent staples as egregiously argued by one just a few months ago - its clear they are closer to hypersonic cruise cyclicals.

[winner69]

Something wrong at Noel Leeming methinks

Might have been bright star a few years ago but sales now not much ahead of pre-covid levels

Maybe the WHS ‘culture’ has finally caught up with Noel Leeming …where doing OK is great and the ability to do their own thing has been taken away from them ….sucked up by the the fantastic ecosystem Nick has created.

[jimdog31]

Something wrong at Noel Leeming methinks

Might have been bright star a few years ago but sales now not much ahead of pre-covid levels

Maybe the WHS ‘culture’ has finally caught up with Noel Leeming …where doing OK is great and the ability to do their own thing has been taken away from them ….sucked up by the the fantastic ecosystem Nick has created.

Nah its just a bump in the road, Noels will be fine. Noels isn't the concern IMHO

[percy]

Nah its just a bump in the road, Noels will be fine. Noels isn't the concern IMHO

I agree.
Yet I went to buy a replacement Panasonic portable radio for the wife.
As I get Leemings' email specials I looked at their price first $36.99.
I then googled Panasonic portable radios and found Harvey Norman had it for $24.00.

[winner69]

I agree.
Yet I went to buy a replacement Panasonic portable radio for the wife.
As I get Leemings' email specials I looked at their price first $36.99.
I then googled Panasonic portable radios and found Harvey Norman had it for $24.00.

Thats one reason why NL are showing share to Harvey Norman anf JB Hifi

[BlackPeter]

People won't give up their KFC though.. the poor chickens don't get a break.

RBD could be another value play ?

Don't forget that NZ has now a significant egg shortage. Wouldn't you need eggs to produce chicken?

[Panda-NZ-]

Sounds like some alterations are needed to the colonel's original recipe.

50% chicken, 50% other.

[winner69]

I posted this back in 2004 -

Amazing that WHS price is still the same as it was 5 years ago

Imagine some poor fella called Sid who went bush for 5 years in November 1999 happy that his WHS shares were $3.80 and came out today and found they were still about $3.80.

Sid asked his sharebroker what has happened to the WHS over the last 5 years - his sharebroker told him

**** Store numbers have increased from 87 to 351
**** Sales are nearly 2 1/2 times what they were - increased from $0.9 billion to $2.2 billion
**** Net assets have more than doubled - from $170M to $357M
**** Now have 15,877 empoyees - 10.262 more than 5 years ago
**** Spent $500M on capital expenditure

So Sid replies 'Thats impressive, they must be making heaps now'

Oh no his sharebroker told Sid - their profit has only increased from $54M to $61M in those five years ... and the earnings per share has gone from 19cents to 20 cents.

Poor Sid - he's incredulous. All that investment and all those extra staff and they are only making the same as they were 5 years ago.

Who does he blame? He can't blame investor sentiment because WHS is still trading at 20X earnings - it hasn't been rerated downward. Sid says to himself that is just as well as if they had been rerated down they might have only been worth $2-$3. At least he still has his capital and he has had a few piddly dividends put in his bank account but inflation has taken care of those.

Sid asks his sharebroker 'Have the WHS really stuffed up somewhere along the way?'

Sid's sharebroker tells him 'No not really. They are investing for the future and all should be right in few years and your WHS shares should be worth $10 each in 5 years'

Sid thinks thats good and decides going bush for another 5 years might be the caper

What will Sid's sharebroker tell Sid when he comes back to civilisation in 5 years time?

And followed it up a few months later -

Sid's brother died and Sid came out of the bush for the funeral. While at the funeral he asked his sharebroker how his WHS shares were going ... must be heading back to $10 by now he asked.

No the sharebroker told Sid .. they are actually worth about 20% less than when you came out of the bush last November

But don't fret said the sharebroker. They are changing the way they do business in NZ, going to go into groceries and think that Woolworths coming into NZ could be good for everybody. The shareprice will go back up to the old heights of old ... it just keep keep going down down down ....

And Sid has gone back to the bush happy as Larry his nest egg is going to grow ....