"Globally, retailers are besieged and only those who are the fittest and who have made the changes needed to compete for today's customers are successful."
Against a backdrop where more than $2 billion was wiped off the value of ASX listed retailers in the month following the announcement of Amazon's arrival in Australia, both the board and management team recognised that business as usual or incremental change was not an option, she said.
Under the leadership of Grayston, who took over from Mark Powell in December 2015, The Warehouse has embarked on a three-year strategy to lift profitability by removing the complexity and cost of an inefficient operating model and reshaping the company's physical footprint to support the digital business.
Grayston acknowledged 2017 had been a challenging year for the retailer, but said he was confident it was well-placed to bounce back.
"As a major retailer facing a rapidly changing competitive consumer landscape, the challenges are far from over," Grayston said.
"I'm excited about the potential of The Warehouse Group to be successful. I do not, however, underestimate the scope of change the business needs to go through in order to deliver sustainable profitability in the future."
In September, The Warehouse posted a 73.9 per cent drop in annual net profit after tax year-on-year after big one-off costs hit the business. Adjusted net profit after tax was $59.2m, down 7.7 per cent compared to $64.1m last year.
In his speech to shareholders, Grayston said the company's transformation strategy would help combat digital threats.
"The world is changing at an exponential pace and is creating an entirely new set of customer expectations.
"In the face of new competitive threats from both online and offline overseas-based players, it became apparent that a continued reliance on this business model would yield similar results ... The risk of not changing was greater than the risk of change."
In a recent presentation to investors, the company highlighted the fact that New Zealand's e-commerce market is growing at an annual rate of 14 per cent, but that local competition was heating up with Kmart's e-commerce launch as well as global players.
The Warehouse is now experimenting with artificial intelligence, as a way to improve customer experience, while improving delivery innovation innovations such as an express delivery trial and testing a chatbot at Noel Leeming.
Withers said the retailer had secured key international executive skills to help it deliver change and recently engaged global management consultancy McKinsey & Company to assist with implementing the strategy "which should give the market greater confidence that the results we are planning for, will be delivered."
Sir Stephen Tindall, founder and director of The Warehouse, was not at the annual meeting and is on a year's leave of absence. His son Robbie Tindall is standing in as an alternate director.
- additional reporting BusinessDesk.
