The Warehouse Group interim chief executive John Journee expects the business' new operational strategy to drive better results.
The Warehouse Group interim chief executive John Journee expects the business' new operational strategy to drive better results.
The Warehouse Group will review the product range at its red sheds and focus on growing its business customer base as it attempts to recover from its toughest result in 42 years.
New Zealand’s largest retailer on Thursday morning announced a net loss of $54.2 million in FY24,significantly lower than the $29.9m profit in FY23 as it battled cost-of-living pressures and stiff competition.
All three of its brands, The Warehouse, Warehouse Stationery, and Noel Leeming, reported sales declines, with falls of of 5.3%, 6.7% and 5.3% respectively.
The group also reconfirmed it has no plans to further pursue a deal with founder Sir Stephen Tindall and a private equity firm to take the company private. The attempt faltered last month after it failed to get support from another significant shareholder.
Warehouse Group interim chief executive John Journee said its focus would be on re-evaluating the product ranges across the board, growing its business customer base and the return to an individual strategy for each of its brands.
For The Warehouse specifically, Journee acknowledged that its seasonal home and apparel products for winter didn’t perform as hoped, with the business’ operating margin falling 280 basis points year-on-year.
“It’s pretty much a hangover of the old strategy, versus the new strategy. What our customers were missing from us was the newness in fashion, which we had downplayed in that move to the focus on essentials. That was a misstep, and that’s what we’re fixing,” Journee said.
He said that the business’s new summer range recognises where it had gone wrong and that customers are responding to it well, although according to the first eight weeks following the financial year, the group’s sales have remained soft.
Despite The Warehouse’s online sales dropping by 22% this year, Journee was not worried, instead positing that its customers just prefer shopping in-store.
“We’ve got over 90 million people walking through our doors every year. That’s what they prefer,” Journee added.
“We’re 20 minutes from virtually all of New Zealand, so they don’t need to choose the more difficult route online. They can choose online where it gives them a choice or if it’s convenient for them. So I think what you’re seeing in The Warehouse is them choosing the channels that work for them.”
The Warehouse has fresh produce across 22 stores around the country.
One key area of growth for The Warehouse despite its poor result was in grocery, contributing to 25.8% of The Warehouse’s total sales, up 12.5% compared to last year.
Speculation has persisted for years that The Warehouse could be an option that New Zealand’s supermarket industry needs in order to break up the current duopoly, and continued growth for its offering supports the notion it could compete.
But Journee reconfirmed that the business has no plans to place greater focus on its grocery offerings.
“Our customers are liking the value that we’re giving in that area, and everyday staples are an important part of the spend at the moment. But probably the way to frame that is that we’re basically following customer demand in that area,” Journee said.
“But we are a multi-category store, so bringing those other categories, getting them into growth mode as well, is really important to our mix.”
Journee is also resetting the group’s strategy for its core brands, admitting that the company held on to TheMarket and Torpedo7, for far too long.
Part of the group’s strategic reset is the introduction of dedicated leadership and retail teams for Warehouse Stationery and Noel Leeming, which Journee believes will help focus them in the market.
“Before, decisions were going through a group lens to see if they fitted the strategy well, that whole piece is gone now, so that’s moving much more decisively,” Journee said.
Both Noel Leeming and Warehouse Stationery had tough results but for differing reasons.
Warehouse Stationery’s print and copy centre offering continues to be a hallmark of the business, but it also had the largest decline in its operating margin, down 370 basis points.
Noel Leeming on the other hand reflected the wider changes to consumer behaviour in the current economic environment, with high-ticket item sales trending down.
But this has opened other avenues for the business, with foot traffic falling by 8.5% while click-and-collect grew to be the brand’s most popular option for customers, representing 67.2% of sales.
Journee wants to see the group’s business membership plan BizRewards, with over 30,000 members, utilised better by the new leadership team.
“That’s probably a victim of a little bit of distraction there, and the team have jumped on that pretty quickly in correcting that,” Journee added.
The Warehouse is looking for a new chief executive, with Journee set to continue as interim chief for the foreseeable future to the end of the calendar year after he replaced former chief Nick Grayston.
“I’m a career retailer, so I love retail. I love this company, and I love the people, but now we’ve got a really good team, and I’m clear my job is to set us back on our feet.”
The group is set to reveal its first-quarter FY25 results on November 8.
