The Warehouse Group is set to reduce head office staff due to challenges from shrinking profit margins.
This news comes despite reporting positive sales growth.
The company, which owns Noel Leeming and Warehouse Stationery, recorded total sales of $674.1 million for the 13 weeks ending November 2, marking a 0.9% increase compared to the same period last year.
However, gross profit margins declined by 0.4% due to heavy promotional efforts and “challenging trading conditions” putting pressure on returns.
“Sales revenue and units sold are up, which is an encouraging sign,” The Warehouse Group chief executive Mark Stirton said.
“However, we’re not yet seeing the scale of full-price home and apparel sales needed to materially improve margin performance at The Warehouse,” he said in an update to the NZX.
“A warmer winter led to slower sell-through, resulting in increased clearance activity, which also impacted the value perception of our new spring home and apparel ranges.”
Stirton indicated that the retailer will soon launch a “comprehensive cost reset programme” to shrink the company’s operating costs to under 31% of sales.
The planned restructure will target head office positions, “without reducing frontline team member roles,” the company stated.
“These changes are unfortunately essential to ensure our operating model is fit for purpose and to secure the future of The Warehouse Group as New Zealand’s leading value retailer.”
“These are difficult decisions, and we do not take proposed changes that impact our people lightly. We know the effect this has on our team and their families, especially in the current economy, and we are committed to supporting our people through the upcoming consultation and change processes with care and respect over the coming months,” he said.
The Warehouse Group is also considering the possibility of “co-sourcing additional areas of the business” with the multinational Tata Consultancy Services.
Co-sourcing involves external contractors collaborating closely with internal teams.
“Our strategy is twofold: reducing costs now to recover profitability while continuing to invest in the areas that will strengthen The Warehouse Group for the long term, like our stores, prices and product range,” Stirton said.