Too much bargain hunting takes a toll on margins at The Warehouse: CEO

Friday, 28 November 2025

Warehouse Group chief executive Mark Stirton says New Zealand retail has trained the consumer to “hunt for discounts all the time”, making it more difficult for operators such as itself to keep regular sales stable.

Speaking at the company’s annual general meeting, Stirton told shareholders that the owner of retail chains The Warehouse, Warehouse Stationery and Noel Leeming was seeing its margins under pressure.

Black Friday sales and discounting are already underway - something consumers have come to expect at this time of the year, with Black Friday typically seen as the official start of Christmas shopping.

But Stirton said the group did not want to be discounting, particularly given the state of its eroded margins.

“We don't want to discount, that's the worst thing in retail is to discount your margin, but we've obviously got to respond to the market conditions and what others are doing,” Stirton said.

“I think we've also trained the consumer to hunt for a discount all the time, and so that's also making things more difficult.”

The group was cautious but hopeful for a strong trading environment in the current quarter - typically the busiest of the year, after it had spent much of last year revamping its product assortment, pricing and in-store experience.

But margins remain a problem. The group’s gross margin is 32.2% and cost margin 32.2%, which is why it has zero margin and making a loss. That is why the group was targeting getting its cost of doing business down to below 31%, Stirton said.

He could not say when that would be achievable.

Part of being able to do that included laying off staff in some head office roles as part of necessary cost-cutting measures, as the group had announced earlier this month.

Like most retailers, The Warehouse has found it difficult to navigate a challenging retail environment and sluggish economy marked by low confidence and rising unemployment.

Despite this, the group noted positive sales growth across all brands in its recent first quarter trading update. Warehouse sales rose 0.7% to $389 million, Warehouse Stationery sales grew 2.6% to $52.2m, and Noel Leeming sales rose 0.7% to $230.7m.

In the year to August 3, The Warehouse Group made an after-tax loss of $2.8m - the second year in a row of a loss. Group sales rose 1.6% to $3.1 billion in the year, with sales at the red shed The Warehouse up 1.4% in the period to $1.8b.

Asked about the expected impact from the upcoming launch of Ikea, Stirton said it had encouraged The Warehouse to look closely at the products and pricing of goods available at both retailers.

“Any good competition makes you sharper, and what it’s done to our teams is just made our team sharper and focus on the categories that they're very strong at sharper.

“Flatpack furniture is what they're known for, they're a formidable business, and we've taken a lot of inspiration from them.

“We're looking at our categories. Even now, we've just been through some new reviews and looked at their product categories and where they’re strong, and we’re going after their price points,” Stirton said. “We're definitely not asleep at the wheel.”

Asked by another shareholder why The Warehouse couldn’t outperform Kmart, Stirton said discount retailing was his speciality and he was working to change that.

“We're trying, and our pricing reset is certainly helping,” Chair Dame Joan Withers said in response to the question.

Stirton said The Warehouse had taken its “eye off the ball” and “gifted a lot” of business to Kmart in recent years. However, he was confident it could wrangle that back and turnaround sales.

“We took our eye off the ball on apparel and home, which is their two pillar categories. My personal view is that we gifted a lot to them, and that's my speciality, if you want to call it that, and it's fundamental to us our turnaround.

“Those two categories by themselves are over 50% of our turnover and 55% of our profit so they are fundamental … and if we don't fix those two massive categories, the business won't get the dividends you all want,” Stirton said.

“Kmart are good, but we're coming back and we've got plans. We've got the majority of the product. We’ve just got to coordinate a bit better.”

Withers completed a nine-year term with the group at the end of the meeting, and will be replaced by former acting chief executive John Journee.

Long time director Robbie Tindall, son of Warehouse founder Sir Stephen Tindall, also retired from the board at the end of the meeting.

Warehouse Group shares are trading around 78 cents, down from $4 four years ago.

Withers called FY25 “one of the most demanding years in recent memory for the Warehouse group”, shaped by tough economic conditions and a sharp decline in consumer confidence, rising unemployment and tighter household budgets. She said this had led to “a significant slowdown in discretionary spending, while competition across the retail sector intensified”.

The group’s annual result reflected “resilience” in a difficult market, she said.