The Warehouse Group looks to digital future after profit drop

Thursday, 9 March 2017

The Warehouse plans to offer a more bespoke retail service for customers.

The Warehouse Group says it will focus on low prices and digital sales as Amazon swoops into the Australian market.

Chief executive Nick Grayston said online shopping was a major challenge for retailers worldwide and The Warehouse Group needed to move fast to keep hold of customers.

The group's profits plunged to $13.6 million after tax, from $57.2m a year earlier. The Warehouse Group owns The Warehouse, Warehouse Stationery, Noel Leeming, and Torpedo 7.

New Zealand's largest listed retailer said trading for the half year to January 29 was mixed across its retail brands with subdued Christmas spending and intense competition reducing profit margins.

Grayson said the company would develop a greater emphasis on digital services.

One of the first things we're doing is pulling together a unified view of the customer, we're understanding their needs,' Grayston said.

'We want to engage customers instead of just letting them be part of the transaction. We need to simplify our process; if it doesn't matter to the customer, it doesn't matter at all.'

The group is moving away from stocking shelves for stereotyped customers, to communicating with the customer and creating individualised, bespoke offers.

Individualised and targeted marketing was something Amazon latched onto years ago and was why it was so successful, he said.

But the changes would have to be rapid as The Warehouse Group struggles to catch up to an evolving market.

Last month, the company announced it would shed 130 jobs, or about 1 per cent of its workforce, to save up to $20m a year.

The change in the business model would combine the back offices of The Warehouse and Warehouse Stationery brands and cut out unnecessary roles.

The operational changes had already come at a cost of $4m in the first half of he financial year.

Group sales for the half year were $1.61 billion, up 3.3 per cent compared to a year ago. But staff costs were the biggest driver of a 2.8 per cent increase in costs.

Weak performance in the core The Warehouse stores and a larger year-on-year loss in the financial services business were only partially offset by the strong trading from the Noel Leeming chain.

Grayston said: 'The second half of this financial year will therefore represent a period of transition.'

However, profits for the second half of the year were still expected to be slightly below that of the second half of the last financial year on an adjusted net profit after tax basis.

Shareholders would be paid a 10 cent a share dividend for the first six months and a targeted final dividend of 5c.