The Warehouse Group is back in profit, but not because of its famous red sheds. The retailer reported to the NZX on Tuesday evening a net profit after tax of $11.2 million for the year to 2 August 2026, reversing a $2.8 million loss the year before. Noel Leeming and Warehouse Stationery did the heavy lifting, while The Warehouse itself lost another $7.5 million.
The turnaround came from cutting costs and selling more goods at full price rather than from shoppers spending more. Group sales fell 1.9 per cent to just over $3 billion, although the previous year had an extra trading week. On a like-for-like 52-week basis, same-store sales rose 0.4 per cent.
Operating profit jumped to $22.6 million from $1.3 million. Gross margin rose 40 basis points to 32.6 per cent, and the cost of running the business fell by $29.8 million to 31.8 per cent of sales. The NZ Herald reported it was the first year since 2021 that the group had lifted its margin and cut costs as a share of sales at the same time.
Chair John Journee was careful not to credit the economy. “Importantly, this progress was driven by actions taken within the business rather than an improvement in market conditions, creating a stronger foundation for the next stage of our recovery,” he said, according to RNZ. He added that “materially improving profitability remains our primary ambition”, 1News reported.
The balance sheet improved sharply. Operating cash flow rose $121.2 million to $193.5 million and net debt fell from $96.1 million to $17 million. Capital spending rose to $21.1 million from $12.4 million, mostly on stores. Even so, the board will not pay a final dividend, saying its immediate priority is to rebuild sustainable earnings and keep financial flexibility.
Noel Leeming was the standout. Its sales slipped 0.5 per cent on a comparable basis to $1.01 billion, but operating profit almost doubled to $21.8 million from $11.7 million. Appliances led the way, with sales up 11.2 per cent on the back of whiteware and small appliances. Computer and storage sales climbed 10.6 per cent, which the company linked partly to people replacing gear as Windows 10 support ended and the 3G mobile network closed. Services such as delivery, installation and tech support grew 10.1 per cent, and online sales reached 13.1 per cent of the total.
Warehouse Stationery returned to sales growth, up 2 per cent on a 52-week basis to $227.6 million, and nearly doubled its operating profit to $15.9 million from $8.2 million. Print and create sales rose 13.8 per cent, art and craft 6.7 per cent and office furniture 5.5 per cent.
The Warehouse brand remains the problem child. It is the biggest part of the group, with $1.77 billion in sales, up 0.6 per cent on a comparable basis. Its operating loss narrowed from $12.2 million to $7.5 million, and its gross margin, down 20 basis points over the year, recovered through the second half with the fourth quarter finishing ahead of the year before.
Chief executive Mark Stirton told the Herald the company was improving the style, quality and presentation of homewares and apparel. “These categories represent 50% of revenue and were key contributors to the brand’s improved second-half margin performance, with more apparel sold at full price during the year and margins improved across homewares,” he said. Beauty sales rose 5.2 per cent, apparel 0.4 per cent and toys 3.2 per cent, another record year for the toy aisle.
The red sheds have also rethought groceries. Rather than widening the range, the business has cut back to the pantry basics people buy most. “Rather than expanding the range, we’re concentrating on the staples customers buy most often and where we can offer the best value, like bread, eggs, coffee and olive oil,” Stirton said. The company did not say how much of its sales now come from grocery.
Stirton was frank that the job is only half done. “We’ve made a good start, but our ambitions are much bigger, especially for The Warehouse where we’re determined to earn back our place as New Zealanders’ first choice retailer,” he said.
The wider picture for shoppers explains the caution. The Herald reported that the group said consumer confidence improved in the first half as interest rates eased, but international conflict, higher fuel prices and renewed pressure on household budgets weighed on spending in the second half. Average selling prices fell 1.4 per cent, while shoppers bought 1.8 per cent more items. In May the group blamed the fuel crisis for fewer shopping trips when sales dipped 1.4 per cent.
The new financial year has started quietly. Sales in the first eight weeks were broadly in line with the same period last year, with margins ahead. “With consumer confidence and economic growth subdued, retail conditions are expected to remain challenging,” Stirton said. “We can’t control those factors, so we’re concentrating on improving the areas within our control and delivering a better result regardless of market conditions.”
The result is modest in the context of a $3 billion business. A net profit of $11.2 million is less than 0.4 cents in every dollar of sales. For investors, the more telling date may be 2 November, when the company will hold an investor day to explain its strategy and how it plans to manage capital.
The Warehouse result lands in a mixed week for New Zealand retailers. Hallenstein Glasson lifted its profit 50 per cent on the back of its Australian stores, while Briscoe Group reported record half-year sales but lower profit earlier this month. The common thread is that retailers are finding profit by running tighter shops rather than waiting for customers to open their wallets.
Do you still shop at The Warehouse, or has Noel Leeming become the reason you walk through the doors? Tell us what would win you back to the red sheds in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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