Attributed to Dick Smith demise.
The exit of Dick Smith has accelerated market share momentum for New Zealand technology and appliance retailer, Noel Leeming. Its FY16 operating profit was a strong turnaround in performance from a softer FY15 result, increasing 87.6% from $6.4 million in FY15 to $12.1 million in FY16.
Significant growth in sales overall for the year reflects Noel Leeming’s leadership position in key growth categories such as cellular. Same store retail sales growth in Q4 was 16.7%.
The Warehouse Group, which acquired Noel Leeming in 2012, announced an adjusted net profit after tax for FY16 of $64.1 million, above the guidance range of $61-$64 million previously indicated to the market. Group retail sales for the year were $2.92 billion, up 5.6% compared to last year.
All brands delivered profit growth, reflecting consistency in The Warehouse and Warehouse Stationery, and strong improvements in Noel Leeming and Torpedo. The Group continued to build on a strong first half performance, despite some challenges in currency and a late start to winter trading.
The Warehouse (Red Sheds) same store sales growth in Q4 was up 5.1%, and 4.1% up for the full year. Second half operating profit in Red Sheds was $23.9 million compared to $25.5 million in H2 FY15. For the full year Red Sheds operating profit was up 12.3% year on year.
The Red Sheds continue to focus on improving the product offer, moving more towards an Every Day Low Price strategy in key categories, and delivering excellent customer experience. Particularly strong growth was seen in the core Home, Apparel and Leisure categories. The focus continues to be on driving profit leverage through ‘better products and better prices’ to drive sales growth, and improving cost and working capital control.
FY16 has seen a positive turnaround in performance for Torpedo, with operating profit of $3.4 million a significant improvement on the breakeven result in FY15. Total sales grew 13.3% in the year. Of particular note this year have been the improved performance of the retail stores and the ‘1-day’ daily deals business.
All of the Group’s retail brands are fully online. In addition to straight forward home delivery, all brands offer ‘click and collect’ and ‘endless aisles’ (order extended ranges from within smaller stores) omni-channel services. Total Group online sales were $185.8 million, up 22% compared to last year.
The strategy for the next three years has been developed by the new Group CEO, Nick Grayston and endorsed by the Board. In essence, it is to build on the foundations of the business in its current configuration, focus on lifting profitability through transforming the operating models of the retail businesses to remove complexity and cost, and positioning them to compete in the future retail environment which will be strongly technology and customer-service oriented.
Commenting on the results, Grayston said that “the improvement in the financial performance of the Group demonstrates that the trading strategies are delivering results. These are good foundations to build on, and there is a lot more that we can do to lift profitability significantly and improve customer experience. Our task is to ensure that the business is a strong and profitable competitor in the future retail environment, which will look very different from the traditional retail business model that has served us so well to date.”