New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

Warehouse Group Limited / Equity Bottom-Up

<ul><li>We expect The Warehouse Group (WHS) will report materially weaker performance in its FY23 result, due on 28 September 2023.</li><li>WHS has not provided revenue or earnings guidance for the full year, but we expect cost pressures and a challenging consumer demand environment have been significant headwinds.</li><li>Trading updates from key retailer peers continue to highlight difficult near-term conditions, with no signs of easing. We reduce our earnings expectations primarily for cost pressures. </li></ul>

We expect The Warehouse Group (WHS) will report materially weaker performance in its FY23 result, due on 28 September 2023.WHS has not provided revenue or earnings guidance for the full year, but we expect cost pressures and a challenging consumer demand environment have been significant headwinds.Trading updates from key retailer peers continue to highlight difficult near-term conditions, with no signs of easing. We reduce our earnings expectations primarily for cost pressures. 

The Warehouse Group - Checking Out the Competition

<ul><li>The Warehouse Group's (WHS) 3Q23 trading update showed trading across the brands has been mixed, which is broadly in line with our expectations</li><li>The key positive surprise was strong year-on-year growth in Red Sheds' revenue, consistent with our thesis that The Warehouse (Red Sheds) should be the most resilient division and support group earnings through the economic cycle</li><li>WHS also highlighted some improvement in Red Sheds' margin in the third quarter, though this was not apparent in the other brands.</li></ul>

The Warehouse Group's (WHS) 3Q23 trading update showed trading across the brands has been mixed, which is broadly in line with our expectationsThe key positive surprise was strong year-on-year growth in Red Sheds' revenue, consistent with our thesis that The Warehouse (Red Sheds) should be the most resilient division and support group earnings through the economic cycleWHS also highlighted some improvement in Red Sheds' margin in the third quarter, though this was not apparent in the other brands.

<ul><li>The Warehouse Group’s (WHS) 3Q23 trading update showed Red Sheds sales (~+10% against the prior year) continue to support the wider group, with revenue declines of ~-2% to ~-3% across the other three divisions.</li><li>Group gross margins for the quarter were down on 3Q22 (-160bps) consistent with our expectations for continued margin pressure.</li><li>All brands were affected by year-on-year gross margin reductions, although Red Sheds appears to be faring better with signs of sequential improvement since the interim result.</li></ul>

The Warehouse Group’s (WHS) 3Q23 trading update showed Red Sheds sales (~+10% against the prior year) continue to support the wider group, with revenue declines of ~-2% to ~-3% across the other three divisions.Group gross margins for the quarter were down on 3Q22 (-160bps) consistent with our expectations for continued margin pressure.All brands were affected by year-on-year gross margin reductions, although Red Sheds appears to be faring better with signs of sequential improvement since the interim result.

The Warehouse Group (WHS): 3Q23 Trading Update

Thematic (Sector/Industry)

<ul><li>Much of the action for the upcoming retail reporting season came to light during confession season in February.</li><li>KMD Brands (KMD) reported disappointing half year sales with declines across all brands; Hallenstein Glassons' (HLG) sales were flat, supported by a strong Christmas trading season and trading down trends; and the Warehouse Group (WHS) announced the sale of its under performing Torpedo 7 business for NZ$1. </li><li>The consumer backdrop has been challenging and we can't see any signs of that changing in the near-term. </li></ul>

Much of the action for the upcoming retail reporting season came to light during confession season in February.KMD Brands (KMD) reported disappointing half year sales with declines across all brands; Hallenstein Glassons' (HLG) sales were flat, supported by a strong Christmas trading season and trading down trends; and the Warehouse Group (WHS) announced the sale of its under performing Torpedo 7 business for NZ$1. The consumer backdrop has been challenging and we can't see any signs of that changing in the near-term. 

Retail Sector - Checking Out Reporting Season

<ul><li>The Warehouse Group (WHS) faces a challenging near-term outlook. Inflationary pressures on households continue to weigh on demand at a time when operating leverage in the business is at a peak.</li><li>WHS' key growth opportunity is further expansion of its grocery offering, which is occurring against a favourable regulatory backdrop and may add incremental value.</li><li>WHS appears to be trading in line with its historical multiple, and risk and reward appear balanced.</li></ul>

The Warehouse Group (WHS) faces a challenging near-term outlook. Inflationary pressures on households continue to weigh on demand at a time when operating leverage in the business is at a peak.WHS' key growth opportunity is further expansion of its grocery offering, which is occurring against a favourable regulatory backdrop and may add incremental value.WHS appears to be trading in line with its historical multiple, and risk and reward appear balanced.

The Warehouse Group: Checking Out the Sheds

New Zealand

The Warehouse Group Limited operates general merchandise and stationery supply retail stores throughout New Zealand.

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Warehouse Group Limited (WHS NZ)

The Warehouse Group - Checking Out the Competition

We expect The Warehouse Group (WHS) will report materially weaker performance in its FY23 result, due on 28 September 2023.

Forsyth Barr

The Warehouse Group: 3Q23 Sales Checkout

The Warehouse Group's (WHS) 3Q23 trading update showed trading across the brands has been mixed, which is broadly in line with our expectations;...

Forsyth Barr

The Warehouse Group (WHS): 3Q23 Trading Update

The Warehouse Group’s (WHS) 3Q23 trading update showed Red Sheds sales (~+10% against the prior year) continue to support the wider group, with...

Forsyth Barr

Retail Sector - Checking Out Reporting Season

Much of the action for the upcoming retail reporting season came to light during confession season in February. KMD Brands (KMD) reported...

Forsyth Barr

The Warehouse Group: Checking Out the Sheds

The Warehouse Group (WHS) faces a challenging near-term outlook. Inflationary pressures on households continue to weigh on demand at a time when...

Forsyth Barr

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