What analysts say about Warehouse Group sales decline
Tuesday, 19 May 2026
Analysts say despite sales falling at The Warehouse Group the business is getting better control of its stock and discounting.
The owner of The Warehouse red sheds, Warehouse Stationery and electronics retailer Noel Leeming issued a trading update on Friday revealing group sales were down 1.4% to $700.8 million for its third quarter ended May 3, its first result capturing impact from the conflict in Iran.
Group sales year to date for the 39 weeks ending May 3 were $2.3 billion, up 0.7% on a like-for-like same store sales basis.
Sales at flagship The Warehouse declined 2.5% to $405.3m in the quarter compared to a year earlier, with like-for-like same store sales down 0.8%.
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Warehouse Stationery sales declined 2.9% $57.1m, with like-for-like same store sales up 3.1%.
Noel Leeming sales were a bright spot among the results, up 0.7% to $236.6m, with like-for-like same store sales up 1.1% in the period.
Group foot traffic declined 1.8% during the quarter, while average customer basket size increased 2.7%. Online sales increased 5.4% in the quarter.
Generate analyst Greg Smith said headline sales for the group were still soft, but there were some signs of stabilisation, and gross margins improved.
“This suggests the business is getting better control of stock and discounting, even as consumers remain cautious. The pressure is still concentrated in The Warehouse brand, while Noel Leeming and Stationery are doing more of the heavy lifting. Also notable that foot traffic was lower, but basket size up – people are doing fewer trips with fuel costs, but still shopping,” Smith told The Post.
“Can they ‘win back leadership’ from Kmart? That’s a big ask - Kmart’s model and scale make it structurally tough. The realistic goal is to stop share loss and rebuild relevance; sharper ranges, better store execution, and sustained margin discipline. The next quarters need to show The Warehouse brand returning to positive like‑for‑like sales, not just improving margins.”
Smith said the economy remained a headwind for the company, as well as the unknowns around the conflict, such as if fuel prices would head down, or higher.
According to Forsyth Barr analysts, the Red Sheds was the key disappointment for the group in the results. It said both sales and gross margins were on track to match the $25m EBIT loss it delivered in 2H25, following the $12m EBIT loss in FY25, the research report outlined.
“Prior to Covid, the business delivered an average annual EBIT of NZ$100m. The turnaround of this business has been the primary focus for the group, albeit with mixed success to date,” it continued.
“While sales grew in health and beauty and apparel categories in [the third quarter], they continued to slip in its home category, and the growth of its grocery offering continues to have a negative mix impact on overall gross margin. Cost-out action should provide some reprieve for Red Sheds, but we need to see signs of winning share in key categories and gross margin improvement to have more faith in the Red Shed turnaround story.”
It rated the business as neutral given the mixed results, noting improvements across Noel Leeming and Warehouse Stationery.
In March, Warehouse Group chief executive Mark Stirton told The Post the war on Iran and wider conflict in the Middle East pushing up fuel prices had at that time not had any material impacts on the group, although management was monitoring the situation daily.
However, he said the oil volatility impacting fuel prices had the potential to have “a real impact on our business”.
On Friday, Stirton said consumers had become conscious of rising fuel prices, which had translated to people making fewer shopping trips but buying more when they visited stores.
He said the group was seeing higher costs, particularly across international and domestic freight, and working to manage these pressures “through disciplined retail execution and a continued focus on strengthening the fundamentals of the business”.
Trading conditions are expected to remain challenging, with inflationary pressures, global instability and an uncertain domestic economy continuing to affect consumers and businesses, he said.
“We’re doing everything we can to balance providing everyday value for customers while managing the impact of higher costs on our business.”