The Warehouse Group has forecast another tough financial year, warning investors of continued earnings losses amid sluggish economic recovery and weakened consumer demand.
In a preliminary update released today, the New Zealand retail giant reported that first-half sales for the 2025 financial year had declined 1.6% to $1.607 billion, with earnings before interest and tax (EBIT) expected to fall between $18 million and $20 million—a sharp drop from $62.8 million in the same period last year.
Interim Chief Executive John Journee acknowledged the company’s underwhelming performance, calling the results “unacceptable” and citing “significant uncertainty” around the second half of the year. Despite some positive signs from recent sales trends, the company anticipates its EBIT for the latter half of 2025 will remain in line with last year’s $14 million loss.
Economic Headwinds and Competitive Pressures
The Warehouse Group attributes its financial struggles to the sluggish pace of New Zealand’s economic recovery, which has created a highly competitive retail landscape. A “highly promotional retail environment” has forced the company to engage in aggressive discounting, squeezing profit margins across its key brands—The Warehouse, Warehouse Stationery, and Noel Leeming.
“Whilst we are likely near the bottom of the discretionary retail spending cycle in New Zealand, this level of financial performance is unacceptable,” Journee said. “We remain intently focused on driving improved performance while maintaining financial discipline and keeping costs and capital expenditure under control.”
Industry analysts point to broader consumer sentiment issues, with ANZ’s Roy Morgan Consumer Confidence survey showing only modest improvements in February. According to ANZ chief economist Sharon Zollner, a net 15% of respondents still believe it is a bad time to make major purchases, indicating continued caution in household spending.
Challenges and Strategic Adjustments
While the company has seen some success with its new product and pricing strategies, these improvements have not been enough to offset declining gross margins. Management remains focused on cost control and efficiency measures but admits that the turnaround process will take time.
Journee highlighted ongoing efforts to “[fix] legacy issues, [improve] product offerings, and [execute the] Fighting Fit turnaround plan” across all brands. He noted that while sales trends showed improvement in January and February, pricing pressures and constrained consumer spending continue to limit overall profitability.
Despite these challenges, The Warehouse Group remains hopeful that New Zealand’s economic outlook will improve by late 2025. The company expects lower inflation and interest rates to bolster consumer confidence, potentially leading to increased spending in the latter half of the year.