The Warehouse has made a profit in its 2025 first-half update, but its transition plan is still in progress. Photo / Paul Taylor
The Warehouse has made a profit in its 2025 first-half update, but its transition plan is still in progress. Photo / Paul Taylor
After nearly a full year of searching for a replacement for Nick Grayston as The Warehouse’s chief executive, interim chief John Journee has said he needs more time to reset the business before making the transition.
The retailer’s earnings before interest and tax also took a significant hit, down 54.5% to $19.5m, while gross profit margins decreased by a further 180 basis points to 32.5%.
In bad news for shareholders, no interim dividend was declared.
Journee said the transition was still in its early days, but the result was an encouraging early sign.
“These are our first results under our new strategy and they reflect a business in transition. We’re resetting the focus, addressing legacy issues and embedding our brand-led structure and approach,” Journee said.
Since taking the reins as interim chief, Journee has led the business to shift back to a brand-led strategy, focusing its efforts on making changes internally while other retailers worry more about the wider economy.
“We’re very focused on what we can do and there’s heaps that we can do and are doing. I suppose an advantage of basically leaving opportunities on the table is you can pick them up and run with them.”
Warehouse Group interim chief executive John Journee says he has played a part in the delayed transition to a new permanent chief executive.
Photo / Supplied
Costs and inventory
Over the half, the business had taken measures to cut costs, with its cost of doing business (CODB) down by 2.8%, representing 31.3% of sales.
In the near term, the expectation is for this to reduce below 31%, with two key areas to reduce costs.
“We’ve got quite a bit of opportunity around optimising our IT spend and how it supported the previous strategy, plus the transition costs of bringing big projects into the business and how we can work out those which are transitional costs, but also reshape that technology stack and how we use it to more suit our strategy.
“We believe that that can be done in a leaner, more efficient way and increasingly that will also start to support the business through effectiveness and efficiency. The other thing will just come from the other side of the equation, and that’s just driving the top line.”
The business has reduced store support office costs by 12.8% with project expenditure reduced from $50.2m in FY24 H1 to $8.9m as it ensures any future investments are more considered.
The Warehouse had three store closures over the half, including its Milford, Tauranga and Pakūranga stores.
Dealing with its old inventory is also a key part of the equation, with Journee confirming that it’s predominantly continuity in the essential lines.
“We’ve just got too much of it. It was set on a strategy where we were relying too much on the basic essentials of our business but our customers were asking for more freshness and newness.
“We still had that product coming to us at levels that weren’t aligned with what the customer demand was. So we need to get through it, but it’s actually good product so it’s a timing and phasing issue.”
He said that decisions on how to manage the product are happening at the product and category levels, but believed delivering its new pipeline of products will work towards the future.
New competitor
With Ikea set to open its first New Zealand store later this year, market share for the red and blue sheds is likely to take a hit, further challenging its recovery.
Forsyth Barr analysts recently assessed that Ikea could pull in revenue of about $190m in its first year of operating in New Zealand.
Journee said that while the incoming giant was a competitor, it would help the business learn, adapt and innovate moving forward.
“We actually use those retailers like Ikea and others as benchmarks already internationally, whether they’re here or not, and helping in forming the offers that we think will resonate here in New Zealand.
“It’s more about what are we doing within our own assortments and for our customers as we know them. We know our customers, they talk to us regularly, and they’re passionate.
Journee said: “1.5 million of them visiting our stores every week in red, so we’ve got a huge opportunity for us to really calibrate, which offers are responding and what their needs are going forward and that’s an advantage that we’re increasingly leaning into.”
Key areas of concern will be homeware and flat-pack furniture, Ikea’s speciality.
Warehouse Stationery had its sales continue to decline, with $109.8m in the first half of 2025 down from $136.6m in the first half of 2021.
Journee believes Warehouse Stationery hasn’t had the love it deserves, so a focus of his is bringing back energy to the brand.
He said the brand’s team and technology are areas where the leadership was focusing on to reshape the business. There would also be a continued focus on education and arts and crafts.
It was recently estimated by analysts at Forsyth Barr that Ikea will achieve $190m in revenue in its first year.
Outlook and leadership
The business began refreshing its homeware and apparel product lines over the half, with sales for the Red Sheds performing well in January and February, with monthly group sales in January up 4.5%.
However, during its investor presentation, chief financial officer Mark Stirton confirmed its momentum has slowed heading into March, with the key assumption for the business' outlook focused on gross margin compression.
The group expects economic challenges to persist through 2025, with continued pressure on household spending, and expects to make earnings before interest and tax loss of roughly $14m in the second half of 2025.
The group has also opened a relocated Noel Leeming Blenheim store in February, with a new Warehouse Stationery stand-alone store set to open in central Wellington in the second half.
The question of who will lead the business going forward continues to be asked, with group chairwoman Dame Joan Withers confirming the board has a strong pool of candidates under consideration.
As to why the move has taken so long, Journee said it was his fault.
“I actually spoke to Joan and said, hey, I’m finding some things in here we didn’t necessarily expect to see, and we need to do some work to reset the business so that we knew what type of CEO was right for what we needed to do.”
He said he wouldn’t be setting any timelines regarding when he expects to no longer be interim chief.
“I’ve basically spoken to the board. I’ve said we’ll do what’s right with the business. We need to get this right, we’re being considered about it but we are well in the process.”
The business will share its third-quarter trading update on May 8, with its full-year result due out on October 2.
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.
