Kiwis 'not being well-served' by supermarkets, Warehouse CEO says

The boss of The Warehouse Group says the company was pleased the Commerce Commission has recognised competition isn’t working in the supermarket sector and the NZX-listed retailer is looking forward to playing a bigger role in it.

The group – which owns The Warehouse, Warehouse Stationery, Noel Leeming, Torpedo 7, and TheMarket.com – today released its six-month financial results ending January 30, 2022, showing that record second-quarter sales were not enough to save it from the impacts of Covid-19 restrictions.   

Total revenue of $1.73 billion was down 4% from $1.81b during the previous corresponding period as the company struggled with store closures during the first quarter, with its Auckland outlets closed for nearly half of the first six months in the financial year. 

In the second quarter, however, sales rose to $1.1b from $1.07b year-on-year and hit record levels but it was not enough to bring total revenue up to financially match the previous year. 

Net profit after tax was down 8% to $50 million and the group declared an interim dividend of 10c per share to be paid out in April.

The Warehouse Group chief executive Nick Grayston said: “We’ve had two quite distinct quarters – the first quarter being impacted significantly by a large number of our stores being closed and the second quarter with record sales over the Christmas and summer trading period. It’s another reminder of how challenging the current environment is.” 

Grocery competition isn’t working

Grayston was pleased with how the company was responding to challenges caused by the pandemic but told NBR it was also waiting to see what the government would do in light of this month’s ComCom report on the grocery sector, which he said had “some good stuff in it”, such as the mandatory code of conduct and removal of some of the restrictive covenants. 

He said Kiwis were hurting with inflation and the cost of living going up and claimed The Warehouse was offering breakfast groceries such as eggs, bread, and milk for lower prices than its supermarket counterparts. 

The company was looking forward to playing a bigger role in the sector, he said, but would wait for the government’s next move. The Warehouse unsuccessfully tried to establish an alternative grocery operation back in the early 2000s.

“We’re pleased that there was a recognition that competition isn’t working, and Kiwis are not being well served in the grocery business,” Grayston said.  

“Our whole orientation is around helping Kiwis live better every day and solving their problems, so we’re looking for some help, and we’re looking forward to playing a bigger role in that market.”

The Warehouse Group 

Meanwhile, the first-half results showed sales figures for The Warehouse, Warehouse Stationery, and Noel Leeming all decreased while Torpedo 7 and TheMarket.com grew.  

Grayston said the home office equipment and furniture sales that spiked towards the start of the pandemic have slowed down a bit, but some people have entered replacing cycles and are finding the money to upgrade the things they are using more, such as whiteware, through spending increased time at home.  

Torpedo 7 has also benefited from the borders being closed with people keen to explore their own backyards, and the company planned to continue opening stores while also growing online channels.  

Online shopping has been spurred by the pandemic and makes up an increasing number of sales for businesses. Online sales grew 68% to make up 19% of total group sales, up from 12% year-on-year. TheMarket.com has benefited from this now boasting more than three million products from more than 6000 brands and is on track to deliver more than $100m gross transaction value for the full year. 

Outlook 

Looking forward, The Warehouse Group remains optimistic but did not want to provide full-year profit guidance.  

Grayston said the company was looking forward to tourists coming back but Covid, inflation, and global shipping costs remain challenges.  

The company feels open to the challenges as a more agile and customer-focused business with the ability to pivot as it seems fit.  

“We’re starting to see some real tangible benefits of the years of effort we put into our transformation so we’re very positive about our business,” Grayston said.