Online sales soar but The Warehouse says wage subsidies still needed

Thursday, 15 October 2020

Cost cutting at The Warehouse means up to 750 staff may learn this week that they have lost their jobs.

The country’s biggest retailer, The Warehouse Group, says its online sales are up 55 per cent this year after the company became an essential service during level 4 lockdown.

“We have seen customer shopping behaviour change as a result of Covid-19 and we expect some trends, such as increased online shopping, to continue,’’ chief executive Nick Grayston told the NZX on Thursday.

‘’During the Covid-19 first lockdown, 48 per cent of our customers surveyed said that 2020 was the first time they had shopped online with us.’’

The group has confirmed its unaudited annual net profit released last week of $44.5 million for the year to August 2, down 32 per cent on the previous year.

Grayston said that the $67.8m in wage subsidies it received from the Government had covered just over half its wage bill and meant that the staff got their full wages.

Companies that make a profit this year are under social pressure to repay the wage subsidy, but Grayston said that without it, the group would have made a $4.3m loss.

* The Warehouse presents revised restructuring plan to staff, expected to cost up to 750 jobs

* The Warehouse to hold staff meetings on Monday about restructuring

Revenue was $3.2 billion, up 3.3 per cent on the previous year, or 1.5 per cent when adjusted for 2020 being a 53-week year.

Even though The Warehouse was one of a select group of retailers able to trade online during level 4 and 3, the group’s sales between late March and mid-May dropped 67 per cent or $265m on the same period last year.

However, the fourth quarter was a different story, with pent-up demand boosting sales by 26 per cent.

“The 2020 financial year posed challenges and complexity that we could never have anticipated, pressure testing our strategy and ability to comprehend changes, harness and deploy resources and execute successfully in a dynamic and volatile environment,’’ chairwoman Joan Withers said.

The group – which includes its core The Warehouse stores, Warehouse Stationery, Noel Leeming, Torpedo7 and online website TheMarket.co.nz – is a major employer with around 11,000 staff.

But in June it flagged a major restructuring which has seen it review leases, peg five stores for closure and review staff hours.

It is currently wrapping up consultation with staff over rosters which will potentially see between 500 and 750 people lose their jobs.

Subject to trading over the critical next quarter and any further Covid-19 impacts, the company said it hoped to return to paying dividends in 2021.