Warehouse Group Plans Cost Cuts

The Warehouse Group is planning to cut head office jobs as part of a wide-ranging cost reset, following another quarter of weak profits despite a slight lift in sales. The retailer, which includes The Warehouse, Noel Leeming, and Warehouse Stationery, posted sales of $674.1 million for the 13 weeks ending 2 November—up 0.9 percent on the same period last year.

However, the company also reported a net loss after tax of $52.2 million, down further from the $29.8 million loss it recorded a year earlier. Gross profit margins fell by 0.4 percent, with chief executive Mark Stirton blaming “challenging trading conditions” and heavy discounting, particularly at The Warehouse’s red shed stores.

“Sales revenue and units sold are up, which is an encouraging sign. However, we’re not yet seeing the scale of full price home and apparel sales needed to materially improve margin performance at The Warehouse,” Stirton said.

A warmer winter season meant some seasonal products didn’t sell as expected, leading to increased clearance activity. This, in turn, affected customer perception of new spring home and apparel ranges. Stirton said the company would now begin a “comprehensive cost reset programme” aimed at cutting business costs to below 31 percent of sales.

“Our shareholders rightly expect decisive action, and that is exactly what we must deliver,” he said. The proposed restructure would focus on head office roles and not impact front-line retail staff.

“These changes are unfortunately essential to ensure our operating model is fit for purpose and to secure the future of The Warehouse Group as New Zealand’s leading value retailer,” Stirton added.

The retailer is also exploring a potential partnership with multinational firm Tata Consultancy Services to “co-source” areas of its operations.

“Trading conditions remain challenging, and we are doubling down on our efforts to improve gross profit margins and reduce cost of doing business in order to help improve profitability,” he said.

Same-store foot traffic rose 0.2 percent, and conversion rates increased to 58.4 percent. Units sold lifted by 2.6 percent, showing more customers are buying from improved product ranges.

Online sales rose 8.2 percent and now make up 7 percent of total sales, up from 6.5 percent last year. Despite this, average selling prices dropped 2.4 percent due to ongoing clearance stock and a shift in the sales mix toward lower-margin grocery items.

While Noel Leeming and Warehouse Stationery saw improved margins, the group’s overall gross profit margin remains under pressure. Stirton said the cost reset would reduce the group’s cost base, restore profitability, and support long-term sustainable growth.

“These are difficult decisions, and we do not take proposed changes that impact our people lightly. We know the effect this has on our team and their families, especially in the current economy, and we are committed to supporting our people through the upcoming consultation and change processes with care and respect over the coming months.”