The Warehouse Group has warned of more tough financial times ahead.
In a preliminary financial update, the company said while it has seen positive signs its new product and pricing strategies are resonating with customers, “ongoing headwinds” in New Zealand have “slowed the pace” of a financial turnaround.
The Warehouse Group has been plagued with financial issues for some time. Last year, it posted a $54.2m loss.
In today’s update, it said group sales were down 1.6% in the first half of the 2025 financial year to 1.607 billion.
First half earnings before interest and tax (EBIT) were expected to be between $18 and $20 million
Today, The Warehouse Group interim chief executive officer John Journee said post December 2024, the sales trend has continued to show an improved trajectory with January and February delivering positive year-on-year sales growth, but gross margins remain constrained.
“We’re encouraged by the positive customer response when we get our product and pricing right, and this will underpin our performance recovery as we deliver these improvements at scale. Fixing legacy issues, improving our product offer and executing our Fighting Fit turnaround plan across each brand will take time,” said Journee.
“We remain focused on prudent fiscal management which has helped us achieve a positive closing cash balance at the half.”
Gross margins remained under pressure across The Warehouse, Warehouse Stationery and Noel Leeming on the back of a “highly promotional retail environment” caused by the sluggish economic recovery and lower demand.
“While management continues to focus on containing costs in line with its sales performance, these gains have been insufficient to offset gross margin declines,” the company said.
‘Unacceptable’ financial performance
On the second half of the year, Journee noted there remains “significant uncertainty” around the company’s performance which he said was based on the timing and recovery of the New Zealand economy.
At this stage, the best estimate of second half EBIT was that it would be broadly in line with last year, a loss of around $14 million.
“Whilst we are likely near the bottom of the discretionary retail spending cycle in New Zealand, this level of financial performance is unacceptable. We remain intently focused on driving improved performance while maintaining financial discipline and keeping costs and capital expenditure under control.”
It expected the economy to “recover towards the end of 2025” as lower inflation and interest rates take effect. It forecast the improving outlook should boost sentiment and encourage Kiwi families to start spending again.
The company’s full update on first half trading will be provided on March 21.
