Net loss: The Warehouse Group battles Temu, Foodstuffs, Woolworths, Ikea, Kmart, shoplifters

Nick Grayston and The Warehouse Group face a multitude of challenges - but can they fend off their snapping adversaries and get customers back in stores? Photo / Jason Oxenham, NZME graphic

The Warehouse Group posted a sobering result today after an expensive split from Torpedo7 and intense competition from online retailers such as Temu and in-store adversaries including Costco, Kmart and the big supermarkets. Chief executive Nick Grayston and his colleagues pulled few punches when the company published its results - and he’s frank about the challenges ahead.

“There’s crocodiles all around,” Grayston told the Herald.

Those snapping at its heels include online retailer Temu and the local supermarket giants amid pressure on shoppers’ wallets.

The group including The Warehouse, Noel Leeming, and Warehouse Stationery posted a net loss of $23.7 million in its half-year results.

That included the impairment of Torpedo7 assets and restructuring costs. Torpedo7 was sold to a consortium last month for $1 and the retail sector was proving tough for many operators.

“It’s a very competitive environment out there, both in-store and online,” Grayston said.

“The macroeconomic outlook is still very challenging... People are really struggling, we’re seeing defaults on debt spike.”

The company planned to focus on getting back to basics, to core brands. So, The Market.com will be ditched - whether or not a buyer was found.

“We have had some approaches. Whether they come to anything or not, who knows.”

While the online marketplace will go, its back-end infrastructure will stay, included in the Group Marketplace on The Warehouse site and app, which the company said was showing promise.

The Warehouse Group chief executive Nick Grayston.

The Warehouse Group includes several disparate entities, but Grayston said the company was far more streamlined now than at his appointment eight years ago.

Information technology and human resources across the group were better integrated and more agile than before, he added.

Work was under way to integrate other systems across the group.

Temu challenge

Online marketplace Temu has been growing and was able to undercut even Amazon often.

“Temu is a $300 billion company. Their marketing spend has been incredible,” Grayston said.

But he said there were ethical clouds over some of Temu’s operations.

“They use some factories that frankly we will not use.”

Competition was tough domestically too, he said.

The opening of New Zealand’s first Ikea was approaching, Kmart was in his opinion “aggressive”, Costco had generated huge attention and there was the ongoing rivalry with established supermarket giants.

Grocery sales at The Warehouse in the half-year were up 11.7 per cent and now comprised just over one-fifth of all sales.

But the struggle against Woolworths and the Foodstuffs operators could get tougher if a proposed Foodstuffs North Island-South Island merger was approved.

Foodstuffs North Island chairman Dean Waddell in November said the merger would benefit New Zealanders.

But Grayston said the giant supermarkets already had too much power and he believed the merger would be bad for consumers. “We violently oppose it.”

Retail crime

Horrific retail crime news might often focus on small retailers and dairies, but Grayston said his employees had also been victims of violent and abusive customers.

Ram raids on the group’s stores had subsided though, and Grayston said the company had taken action including installing bollards and fog cannons.

“They still try. More often than not, we’re seeing that our defences are holding.”

A Torpedo7 in Whangārei ram raided in June 2022. Grayston said ram raids seemed to have subsided. Photo / NZME

Ram raids were a hassle, but in most cases no staff were hurt.

“What’s more troubling for us... is the abuse our people have to put with on a day-to-day basis,” Grayston said.

“It’s of a magnitude perhaps three times greater than before Covid. There are a lot of people struggling out there who’ve got nothing to lose.”

Positive signs

Grayston said gross profit margins were up, increasing 160 basis points to 34.3 per cent and net debt plummeted from $83.4m a year ago to $18.7m.

Retail in the half-year to January 28 did not benefit from the aftermath of one-off events in ways the previous six months did.

He said after the Auckland Anniversary floods and Cyclone Gabrielle, insurance and social welfare payouts boosted business as people shopped to replace goods lost in the disasters.

And despite many Kiwis doing more shopping online, Grayston said store visitor numbers were stable.

“Despite sales being down, traffic has been relatively flat. It’s an interesting dynamic. Effectively the level of online [activity] has gone back to where it was pre-Covid.”

John Weekes is online business editor. He has covered court, crime, politics, breaking news and consumer affairs.