The Warehouse Group has released its results for the first 13 weeks of FY25 and, while sales declines have decreased, the business continues to face pressure from economic headwinds.
Investors in the Warehouse Group will be hoping its transition plan pays off as the business reported slowing sales declines in its first result for the FY25 financial year.
The group reported a total group sales decline of 2.5% compared with FY24 Q1, with sales of $668 million for thefirst 13 weeks of FY25 Q1.
This is an improvement on the 5.9% decline year-on-year that it experienced in FY24 Q4.
Interim chief executive John Journee said the result was a positive sign.
“Our transition is underway, with our focus firmly on trading each of our core brands and refreshing key product ranges at better value.
“However, these changes will take time to fully show results and we’re mindful that a sustained improvement in performance also relies on the broader economy bouncing back.”
Retail sales for the first 13 weeks at The Warehouse were down 2% to $386.3m, again slowing its decline of 3.7% in FY24 Q4.
Similarly, Noel Leeming’s retail sales were down 2.1% to $229.1m, with the group highlighting strong performance from the brand’s commercial division.
Warehouse Stationery continues to face a tougher market with its sales down 6.8% to $50.9m for the period.
Journee said he expected its near-term results to remain mixed as its new product offering was released amid tough trading conditions.
In-store foot traffic declined by 0.8% in FY25 Q1 compared to the prior period, while customer conversion across the group was up 2.42% to 58%.
However, basket sizes remained constrained as essential and clearance categories dominated sales.
Online sales may be an area of concern for the group, with sales decreasing by 12.9% in the period. It represented 6.3% of the group’s retail sales compared with 7% in FY24 Q1.
Journee is cautiously looking ahead to the Christmas season, expecting the trading environment to remain tight and highly competitive.
“We will be firmly focused on bringing great value products to our customers as we continue to execute our turnaround plans.”
The group announced one of its toughest results in years in September, as total sales fell by $400m in FY24, contributing to a net loss after tax of $54.2m.
The Warehouse Group chair Dame Joan Withers said the result was one of the most challenging in the business’ 42-year history.
“The poor financial performance we’ve reported this year is not acceptable. The board and executive leadership team are acutely aware of the disappointment shareholders will be experiencing and the big job ahead of us to get the company back on track.”
Slowing may be an illusion
Forsyth Barr analyst Paul Koraua said the result might not be a sign of improvement for the group as the challenges remained.
“They came through slightly lower than we were expecting in our forecasting,” Koraua said.
His biggest concern from The Warehouse Group’s first 13 weeks’ result was the pressure on its gross margin.
“The Warehouse spoke to a lot of gross margin pressure with competitors all fighting over the same pie in terms of how much consumers are willing to spend, which means that they’ve had to cut prices.”
Average retail selling prices for the group were down 7.9% compared to the same period last year, with the focus on resetting its key price points across categories.
“Because of all the competitive pressures, you’re probably going to see gross margins come down a tiny bit, which is going to hit their bottom line.
“It’s going to be another tough year.”
He believed gross margin pressures were going to be a key theme over the next 12 months across the industry.
As for the tariffs proposed by United States President-elect Donald Trump, Koraua did not expect them to have an impact in the short term.
However, he said reported bulk buying by firms in the US post-election could affect imports in the second half of 2025 and beyond.
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.