ZB

The Warehouse considers its grocery options

Author
Jamie Gray, NZ Herald,
Publish Date
Fri, 13 May 2022, 2:11pm
(Photo / NZ Herald)
(Photo / NZ Herald)

The Warehouse considers its grocery options

Author
Jamie Gray, NZ Herald,
Publish Date
Fri, 13 May 2022, 2:11pm

The Warehouse is "seriously considering" its grocery options after the country's two big supermarket chains came under fire for their pricing behaviour.

The discount retail chain already offers a limited range of grocery items.

"While the cost of goods continues to increase, we're holding or dropping prices where we can across essential grocery and pantry items like bread, milk, cereal and pasta as well as essentials to keep families warm such as children's flannelette pyjamas and merino clothing," chief executive Nick Grayston said.

"Kiwi families tell us that they're not getting good value from supermarkets and they want to have more grocery options available at The Warehouse.

"It's something we're seriously considering and we're watching with interest to see what steps the Government will take to make a difference to New Zealanders and allow other players like us to enter the grocery market in a bigger way."

The big supermarket chains came under fire in the wake of a Commerce Commission report on the retail grocery sector, which recommended a suite of changes to increase competition.

Commission chair Anna Rawlings said in the report - released in March - that competition in the grocery sector "is not working well for New Zealand consumers".

"We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges," Rawlings said at the time.

In recent days Woolworths and Foodstuffs have outlined measures to try to offset the impact that very high inflation is having on their customers.

The Warehouse, in a business update, said its third quarter was a mixture of Covid-affected earnings, increased online and grocery sales, along with improved margins.

The company said group sales for the 13 weeks to May 1 were $771.6 million, down 2.5 per cent compared to the third quarter of 2021, up 31.6 per cent on Q3 2020, and up 8.0 per cent on Q3 2019.

Grayston said the trading environment continued to be challenging with high inflation impacting consumer spending, shipping delays affecting the group's stock availability, and some customers remaining hesitant to return to stores in person.

"Despite these factors, Q3 has held up relatively well with a solid performance across the group."

The company expects shipping schedules will remain constrained through the fourth quarter and into 2023.

Online sales were $86.6m, an increase of 7.4 per cent compared to Q3 2021, and representing 11.2 per cent of total group sales.

Click and collect sales continued to grow as a preferred choice for online customers with $36.9m in the quarter, up 17.7 per cent compared to FY21 Q3, and representing 47.3 per cent of group online sales.

Group gross profit margin was 35.6 per cent - up 90 basis points from 34.7 per cent in the first half.

The company said its group sales were severely impacted by the first Covid-19 level 4 lockdown but were up 8.0 per cent on 2019 pre-Covid levels.

Year-to-date group online sales were $422.2m, up 50.2 per cent on the same period last year, and making up 16.9 per cent of total sales, increasing from 10.8 per cent of total sales in the full 2021 year.

Group-wide in-store foot traffic was down 13.0 per cent in the quarter compared to last year and was impacted significantly by New Zealand being at the red setting of the Covid-19 Protection Framework for 74 out of 91 days during the quarter.

Since the move to orange setting on April 14, the Warehouse had seen an improvement in foot traffic numbers but this is still down compared to the prior year.

The group results for the year to July 31 are due in September.