The Warehouse Group's annual profit plunges over 66%

Thursday, 28 September 2023

The Warehouse Group’s annual profit has fallen over 66% in what the retailer has called a “disappointing” result following a challenging year.

The company behind The Warehouse, Warehouse Stationery, Noel Leeming, and Torpedo7 posted a $29.8 million profit in the year to July 30, down from $87m the previous year.

Sales rose 3.2% to $3.4 billion, of which almost $2b was generated from The Warehouse.

The Warehouse Group chief executive Nick Grayston said sales from The Warehouse stores rose 9.6%, the highest annual sales increase in the red shed’s history.

He attributed the increase to shoppers choosing cheaper goods in the current tough economic conditions and the cost of living crisis.

Tough economic conditions with high interest rates and inflation has put pressure on consumer spending, with a slow down in spending felt throughout winter across a wide range of retailers.

Inflation had significantly impacted group margins and had driven up the cost of doing business, Grayston said.

“It’s been a tough year for both us and our customers. We're proud to have kept the essentials affordable for families and strong sales at The Warehouse reflect this,” he said.

“We continue to invest in the transformation of the group, particularly in infrastructure. This has coincided with much weaker consumer confidence and a shift in spending, especially big-ticket items, to travel and entertainment. These factors have compromised our margin and profitability and particularly affected Noel Leeming and Torpedo7.”

Grayston said the consumer trends had put pressure on the business and led to a “disappointing overall result”.

The company will pay a final dividend of 8 cents a share, down from a final dividend of 10 cents a share the previous year.

The group said shoppers had returned to in-store shopping across its brands, with foot traffic up 14.2% in the year.

Online sales had normalised to pre-pandemic levels and now accounted for 10.9% of total sales.

Its grocery sales, an increasing focus for the group, grew 26.1% in the year.

Overall sales at The Warehouse increased 9.6% to a record $1.9b in the year, while online sales dropped over 34%, accounting for 6.3% of total sales.

Warehouse Stationery sales were down 0.4% to $248.6m, and Noel Leeming sales declined 3.3% to $1.06b. Sales at Torpedo7 were 5.4% lower at $162m.

Sales for the new financial year were “softer” than expected, and despite the busiest time of the year ahead with Christmas, the group remained “cautious”, Grayston said.

“The 2024 financial year has started with softer sales than expected, whilst our gross profit margin is meeting expectations. Torpedo7 is our most challenged brand, and we will be reporting on the performance against our recovery plan at half year,” he said.

Project spending had been capped a $80m for the year, with a focus on delivering major projects that were underway.

'Looking ahead to our busiest time of year, we remain cautious. We will continue to adapt our trading plan to meet market conditions as sales build through peak season.”

Warehouse shares fell 2.9% to $1.70 in mid-morning trading on the NZX on Thursday. Its stock is down 35% this year.