The Warehouse Group win the 2019 Deloitte Top 200 award for Most Improved Performance.
The big “red sheds” of The Warehouse have become an integral, even iconic, part of the New Zealand retail landscape. But within the stores there’s been plenty of change to keep ahead of the pack in the highly competitive general merchandise sector.
Chief executive of The Warehouse Group, British-born Nick Grayston who spent 20 years in United States retail said: “I’ve been in the role for four years. In that time, I have noted the incredibly fast-changing pace of global competition and digital disruption.
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“It is fair to say New Zealand retailing is also bearing the brunt of globalism. With this in mind, we knew we couldn’t continue with the status quo and we have had to make bold decisions to effectively compete and deliver to our ever-changing customer expectation and shopping habits. These changes have really begun to reap reward,” he said.
The Warehouse, established in 1982, increased its net profit 25.6 per cent to $74.1 million for the year ending July on revenue of $3.1 billion. Group online sales rose 18 per cent to $239.2m. Warehouse Stationery achieved a record operating profit of $16.7m and Noel Leeming sales were up 5 per cent, resulting in a record operating profit of $38.1m.
The Warehouse, which has more than 270 stores including Torpedo7 and employs 12,000 people, is in a good place and won the OneRoof.co.nz Most Improved category last night at the Deloitte Top 200 awards.
Judge Ross George, managing director of Direct Capital, said The Warehouse grew revenue, profits and gross margin significantly in the 2019 financial year and the share price reflected that: up more than 30 per cent over the past 12 months.
“This performance is because of the successful execution of its business transformation programme, stripping out complexity and making it a more flexible operator.
“For 30 years The Warehouse has been an enduring New Zealand story,” he said.
“The Warehouse has adapted to the changing and challenging retail environment and has seen continued improvement in its trading performance alongside a concurrent reduction in debt.”
Grayston said there had been multiple initiatives, “some at brand level and others that leverage our capability as a group.”
It introduced the concept of a store within a store by integrating some Warehouse and Warehouse Stationery operations to provide greater customer experience; its pricing strategy was based on Everyday Low Pricing; and the Noel Leeming stores practised smart home management technology and services.
The Warehouse implemented new warehouse management systems and modified its design and sourcing processes — with design handled in New Zealand and sourcing in China and the recently opened India office.
Grayston said having a second office in India improved the group’s ability to source from a wider range of countries to deliver quality products from audited and ethically approved factories.
The Warehouse has become the third retailer in the world and the largest company in New Zealand to be carbon neutral and carboNZero certified.
And it has not only put a big effort into sustainability but also e-commerce.
The group launched TheMarket online shopping platform, offering a range of international, local and niche brands, to ward off entrants like Amazon. Subscription to TheMarket offers shoppers free delivery for orders over $45, exclusive deals and discounts, one and three months free trials for Sky Sports Now and Neon, and a $35 kickstart to investment scheme Hatch for $5.99 per month or $59 a year.
“We have invested in our e-commerce channels to enhance customer experience and fulfil orders, and we see significant opportunity in this area given the limited marketplaces existing in New Zealand,” said Grayston.
“We could have easily driven profit through cost out and retrenching, but instead we took a longer view that recognised our role in our communities and the wide New Zealand landscape,” he said.
Two million New Zealanders shop with The Warehouse every week.
Finalist: SkyCity Entertainment Group
Like The Warehouse, SkyCity Entertainment has established an iconic brand in New Zealand and it operates in a volatile environment.
SkyCity has some exciting projects in place and is producing a solid financial performance.
It is completing the ill-fated New Zealand International Conference Centre and Horizon Hotel in Auckland and the expansion of the Adelaide casino and hotel.
It has bought one hectare of lakefront land in Queenstown for a future hotel development and it is looking to develop its Hamilton Casino on the banks of the Waikato River. It launched an offshore online casino in August in partnership with Gaming Innovation Group.
SkyCity freed up $450 million by selling the Darwin Casino, the Auckland car park concession and Federal St car park.
Chairman Rob Campbell said in the group’s annual report that the past year has been one of solid performance by SkyCity’s ongoing business while progress has been made on major projects setting the stage for future improvement.
SkyCity is New Zealand’s largest tourism, leisure and entertainment company, employing just over 5000 people. It has five casino licences, 3200 gaming machines, 580 table games and operates 635 hotel rooms as well as 40 bars and restaurants.
For the year ending June 30 SkyCity had a gain in its international business with turnover reaching $14.1 billion, up 19 per cent on the 2018 full year and increasing its share of the Australia and New Zealand VIP market. Auckland gaming machine revenue rose 7.4 per cent.
SkyCity had normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) of $342.7m, up 1.3 per cent on the previous year and normalised net profit of $173m, up 1.9 per cent.
Top 200 judge Ross George said SkyCity’s new strategy and organisation focuses on the creation of both sustainable shareholder returns and diversity issues. Its profit after tax has grown despite a more challenging operating environment and one-off impacts. “SkyCity is well-placed to be the leader in gaming, entertainment and hospitality in its communities,” said George.
Finalist: WEL Networks
The Waikato electricity and broadband distributor WEL Networks operates in the shadow of the bigger listed energy companies. But that doesn’t phase the regional group which has become a quiet achiever.
WEL Networks, serving the Waikato for 100 years, connects 91,458 homes and small businesses and 816 industrial sites. More than 60,000 of the company’s smart meters have been installed in homes and businesses, and it maintains 6800kms of power lines. The group’s total assets increased $91m to $1.2 billion.
Over the past year 1371 new customers connected to its electricity network, and it operates a 3000km ultrafast fibre network in Hamilton, Tauranga, Whanganui, New Plymouth, Hawera, Cambridge and Te Awamutu.
Work is underway to provide fibre to 27 more North Island towns and urban fringe areas.
Owned by the community through the WEL Energy Trust, WEL Networks had total revenue of $211m and net profit of $31m for the year ending March 31. The revenue was $35m ahead of the 2018 financial year as a result of the continued growth in electricity and broadband customers, including 22,600 subscribing to its ultrafast fibre offering.
WEL Networks reduced residential line charges by $6m, providing an average saving of $77 to residents and forecasting a further $70 in the current financial year.
Deloitte Top 200 award judge George said WEL Networks clearly understand its customers. It has delivered cheaper energy prices, reduced tariffs and increased investment in the Waikato.
As a result there are higher commercial lines consumption, customer growth across the fibre network and continued urban development in the region: “WEL Networks has had nearly 10 per cent annual growth rates over the last five years and has achieved large profit leaps as it continues to future-proof the region,” he said.
OPINION: Tensions are likely to become more evident next year.