A highly promotional retail environment has put pressure on gross margins across The Warehouse, Warehouse Stationery and Noel Leeming. Photo: SUPPLIED
The Warehouse Group expects to report another weak financial result, with first-half underlying profit to be down on the year earlier.
The retail group said a sluggish economic recovery and lower customer demand had created a highly promotional retail environment, which was putting pressure on gross margins across The Warehouse, Warehouse Stationery and Noel Leeming.
The underlying profit for the six months to the end of January was expected to be in a range of about $18-$20 million, or more than a third down on $62.8m reported the year earlier, with a full report available on Friday 21 March.
Sales were down 1.6 percent to $1.6 billion and profit margins under pressure.
Chief executive John Journee said the retail group's year-on-year sales had improved in January and February, but gross margins remained constrained.
While management continued to focus on containing costs, he said the gains had been insufficient to offset gross margin declines.
"We're encouraged by the positive customer response when we get our product and pricing right, and this will underpin our performance recovery as we deliver these improvements at scale."
Chief executive John Journee. Photo: SUPPLIED
However, he said it will take time to fix legacy issues affecting the group's performance with "significant uncertainty" around the group's second half performance and the timing and momentum of New Zealand's economic recovery.
He said the full-year result was likely to be little changed from the year earlier's underlying loss of $14m loss.
"Whilst we are likely near the bottom of the discretionary retail spending cycle in New Zealand, this level of financial performance is unacceptable.
"We remain intently focused on driving improved performance while maintaining financial discipline and keeping costs and capital expenditure under control."
Journee said the group expected the economy to recover towards the end of calendar year 2025, with lower inflation and interest rates driving up consumer spending.
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