‘That’s the Warehouse of old’:Turning round the Red Sheds

Friday, 21 March 2025

The Red Shed strategy is to be ‘on-trend’, and to develop a sense of buzz in stores. Photo shows a MCoBeauty tutorial happening in a Red Shed.

The Warehouse Group’s interim chief executive John Journee spent much of Friday talking to stakeholders about signs of “momentum” in the retail group’s “Fighting Fit” turnaround plan.

“We were in a position where we were the disruptor. We’re now responding to disruptors. We’re working to get back to being the disruptor again,” he told shareholders.

The Warehouse is in a pitched battle for share of household spending against specialist retailers like Briscoes, Animates and Chemist Warehouse, as well as the likes of supermarkets and Kmart.

“You've got to be up for a fight, and we're absolutely up for a fight,” says Journee, who has ruled himself out of taking on the job permanently, as the search for a new CEO continues.

Exhibit one in the turnaround story is a pistachio Easter egg.

“There’s a fashionable Dubai chocolate pistachio trim that’s going nuts,” says Journee. “We’ve got the Easter egg. We’re the only ones that have currently got that.”

“That’s The Warehouse of old. That’s what I grew up with,” he says.

The mission of turning round the Red Sheds involves cracking down on costs during a rolling programme of store improvements, and a shift to providing “on-trend”, well-priced products for households, and customer segments it needs to do much better with, like teenagers.

It’s launched a teen beauty range called Poppi, which Journee says is going well. But it’s also trying to bring more buzz to its stores by working in collaboration with brands that see it as a way of reaching large audiences.

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One of those is MCoBeauty, which has been running pop-up in-store cosmetics tutorials.

“We are basically working out that we don't have to do it all,” Journee says. “We've got brands that are absolutely enthusiastic about working with us. MCoBeauty is one of the strongest on-trend brands globally at the moment. And we're smashing out of the park with them.”

Part of the pitch for brands like MCoBeauty is that there are Red Sheds within a 20-minute drive of 85% of people.

The retailer has been refreshing line after line of its products with the “on trend” mantra, with an especial focus on beauty, apparel and homewares.

Its new pastel-shade toasters have been flying off the shelves, Journee says.

Apparel is particularly important. New ranges include its Basketball NZ brand.

The Warehouse’s Kia Kaha apparel range has proved popular.

Journee says he particularly enjoyed Waitangi Day when the relevance of The Warehouse’s Kia Kaha Māori language clothing line was on display for all to see.

“Our apparel was all over Waitangi,” he says. “It was exactly what our customers were looking for.”

The Red Sheds were not department stores for middle and low-income households.

Warehouse Group interim chief executive John Journee is not throwing his hat into the ring to take the job permanently.

Journee conceives of them as fulfilling “customer missions”; missions to buy clothes, to buy homewares, to buy something for breakfast (It’s launched a Market Kitchen cereal range), to buy toys.

Success is when customers fulfil more than one of their missions during a visit.

“We are a multi-category store,” he says. “We see ourselves serving the Kiwi family, and they have a wide range of needs. That's our job to do, and it's not an outdated one.”

But there’s a job ahead to get people into the Red Sheds, and to make them more light, bright and exciting.

There is work underway on creating destinations within the Red Sheds to produce better store “flow”. Beauty zones in some stores are a first taste of that.

Grocery is a small, but important and growing area of sales in Red Sheds.

More will follow, Journee says.

“We’re looking how we frame up that for the pet zone, for example. We’ve got, a big pet business. What does that look like? Same with baby. If you’re in that baby world at the moment, what does that look like?”

It’s a reshaping, a reforming of the Red Sheds.

“These sort of shopping destinations start to make more sense,” Journee says. “We’ve got work to do.”

In the six months to January 26, same store sales fell in the six-month period, store traffic remained flat, but more people coming into Red Sheds bought things.

And, toys, fast moving consumer goods, beauty, furniture and audio all saw pleasing growth in sales, the retailer said.

But a look at the financials shows the public has not yet responded en masse to the things Jounree is highlighting.

The interim six-month figures for The Warehouse Group, which includes Noel Leeming and The Warehouse Stationery, showed sales of $1.6 billion were down 1.6% on the same period a year before, with margins also down, though that was in part due to discounting to clear old Red Shed stock to make way for refreshed lines.

Its operating profit of $19.5 million was down on the $43m it reported in its first half-year period the previous year. However, the retail group’s net profit after tax was $11.8m, up from reported net loss of $23.7m. The previous large loss was caused to a large extent by the writing down in the value of Torpedo7, which the group now no longer owns, and restructuring costs.

And its shares have a long way to come back, having fallen 45% in the past 12 months.