The Warehouse Group makes $54.2 million loss
Thursday, 26 September 2024
The Warehouse Group made a loss of $54.2 million in the year to July 28 - a year that chairperson Dame Joan Withers is calling “one of the most challenging” in the retail company’s 42-year history.
The owner of retail chains The Warehouse, Warehouse Stationary and Noel Leeming saw its earnings plunge by more than 280%, and its sales decline by 6.2% to $3 billion in the year.
The group said its earnings were significantly impacted by the disposal of Torpedo7 in March. In the previous year it made an after-tax profit of $29.8m.
The Warehouse will not pay a final dividend to shareholders.
Withers described the result as unacceptable and a “poor financial performance”.
She said the 2024 financial year was “one of the most challenging” in the retail company’s 42-year history.
“The poor financial performance we’ve reported this year is not acceptable. The board and executive leadership team are acutely aware of the disappointment shareholders will be experiencing and the big job ahead of us to get the company back on track,” Withers said in a NZX announcement on Thursday morning.
She said the economic climate in New Zealand had been difficult for most retailers, with inflation, high interest rates, and a weak economy significantly reducing consumer demand.
Withers acknowledged that the group’s trading performance and operational execution had “fallen short” and been exacerbated by these market challenges.
Sales at the red sheds declined to $1.8b in the year, down 5.3% on the previous year.
Warehouse Stationery sales were by 6.7% lower to $231.9m, and Noel Leeming sales declined by 5.3% to $1b.
Group sales were down 4.9% in the first half of the year but deteriorated further, down by 7.6%, in the second half.
The Warehouse Group interim chief executive John Journee said work was “well under way” to turn the company’s performance around.
“Our 2024 financial year performance is disappointing,” Journee said.
“Our ecosystem strategy was too ambitious, and we took our eye off the ball on product. We held onto Torpedo7 and TheMarket.com too long, reacted too slowly to changing customer spending, and fell out of step with what Kiwi families want.
“We’ve made mistakes and we own that. But we know where we went wrong, and we’re already working hard to fix it.”
Journee admitted that The Warehouse’s category strategy was “off the mark, our execution was poor, and our customer offer was inconsistent”.
“We’ve had a particularly challenging second half. Our winter range didn’t resonate sufficiently with customers and we needed to discount heavily as a result. This, along with increased promotional activity, caused the 250 basis points gross margin gains achieved in the first half to be eroded in the second half, ultimately delivering a modest gross profit margin of 10bps year on year.”
Even without the $60.5m loss from the sale of Torpedo7, Journee said the company’s underlying profit was still down on the previous year. “We need to significantly improve our performance and in the time since I assumed the interim chief executive role, I have been focused on ensuring we are set up to execute our turnaround plan.”
Journee said The Warehouse had reset its group strategies and moved away from agile to instead focus on trading of its core brands. He said The Warehouse chain was the group’s main focus.
“In July, we restructured our senior leadership and changed our operating model from agile to a fit-for-purpose retail operating model.
“The Warehouse will be our key focus. We’re getting back to basics by focusing on our core retail strengths. We’ve begun resetting our categories to bring in more trend and newness, and better merchandising. This will strengthen our market position and improve profitability,” he said.
“With the right strategy underpinning our actions, we’re determined to deliver on our promise to provide great products at affordable prices.”