Continued margin pressure and an unsustainable cost base has led The Warehouse Group to implement a comprehensive cost reset programme, which could slash head office roles.
Chief executive Mark Stirton said the group’s shareholders expect decisive action, and that’s what he plans to deliver.
“Our strategy is twofold: reducing costs now to recover profitability, while continuing to invest in the areas that will strengthen The Warehouse Group for the long term, like our stores, prices and product range.
“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.”
The programme will focus on continuing to drive down the cost of doing business (CODB) across the group, with a proposed restructure of head office roles without reducing front line roles.
A spokeswoman for The Warehouse Group could not confirm any details as to how many roles could be affected.
“As this is a proposal and we are entering a consultation process with our teams, we are not able to confirm any details at this stage. Our priority is to work through this carefully and support our people with care and respect throughout the process,” she said.
The business is also pursuing opportunities to expand its partnership with Tata Consultancy Services and potentially co-sourcing additional areas of the business.
The group partnered with Tata Consultancy Services to support its digital transformation, estimating the partnership would reduce costs for licences and managed services by up to $40m over five years.
The Warehouse Group has previously signalled its intent to reduce its cost of doing business (CODB) to below 31% of sales.
The group’s CODB increased 0.2% to $993.8 million according to its 2025 annual report, although it decreased 40 basis points as a percentage of sales from 32.6% in FY24 to 32.2% in FY25.
For the business to reduce its CODB from 32.2% to 31% and below, it would need to reduce costs by roughly $30m.
“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.
With the announcement of its cost reset programme, the group shared its first quarter results for the 2026 financial year, reporting a 0.9% increase in group sales to $674.1m over the first 13 weeks.
The group reported positive sales growth across all three brands, with The Warehouse sales lifting 0.7% to $389m compared to the same period last year, Warehouse Stationery up 2.6% to $52.2m and Noel Leeming up 0.7% to $230.7m.
Group like-for-like same-store foot traffic increased by 0.2%, and conversion improved 30 basis points to 58.4% with units sold up 2.6%.
However, average selling prices declined by 2.4% because of the highly promotional retail environment, changing sales mix as grocery continues to grow, and ongoing clearance activity.
Gross profit margins at The Warehouse also remain under pressure, with the group gross profit margin down 40 basis points in the year to date compared to the same period last year.
Online sales have also grown, lifting by 8.2% compared to the prior corresponding period and now comprise 7% of total sales in FY26 Q1 compared to 6.5% in FY25 Q1, driven by particularly strong online sales growth in Noel Leeming.
“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.”
“There are encouraging signs our new product ranges and in-store experience are resonating with customers. Trading conditions remain challenging, and we are doubling down on our efforts to improve gross profit margins and reduce Cost of Doing Business (CODB) in order to help improve profitability.”
The Warehouse Group will hold its annual shareholder meeting on November 28.
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.