The Warehouse Group gears up for experimentation

  • News
  • March 9, 2017
  • Sarah Dunn
The Warehouse Group gears up for experimentation

The Warehouse Group chief executive Nick Grayston’s transformative plans for the group include better use of data; a greater focus on omnichannel retail; and strategic use of the group’s financial services division. However, the group has delivered a “mixed” first-half result.

While The Warehouse Group’s retail sales were up 3.3 percent compared to HY16, profits were down, with the group today announcing an adjusted net profit after tax result of $39.7 million for the first half of HY17. Compared to $45.6 million in HY16, it’s down 12.9 percent. The reported net profit after tax is down an alarming 76 percent from $57.2 million in HY16 to $13.6 million.

The group attributes $4 million worth of costs (excluded from the adjusted net profit) to operating model changes. Last month, a restructure was announced which would see the leadership structure of the Red Sheds and Warehouse Stationery combined, resulting in the loss of around 130 jobs. This is expected to generate annual savings of $15-20 million following a one-off restructuring cost of up to $13 million.

Another $22.7 million worth of one-off costs were attributed to the full non-cash impairment of goodwill relating to prior financial services ($22.7M) acquisitions. TWG bought out its financial services partner Westpac in 2015, but the project has since struggled to meet expectations, reporting an operating loss of $5.2 million for HY17.

Chief financial officer Mark Yeoman told the NZ Herald that changes connected to the buy-out meant customers using TWG’s financial services were required to reapply for their cancelled cards, with fewer than expected making the switch.

Nevertheless, Grayston sees the financial services divison as “a very important enabler” for the rest of the business, citing significant credit opportunities from Noel Leeming and Torpedo7, and the potential for such from business customers from the Red Sheds and Warehouse Stationery.

“They’re part of our portfolio of goods and services.”

TWG’s core brand, The Warehouse or ‘Red Sheds’ showed weak performance with its operating profit for the half-year of $59.5 million down by 9.1 percent from HY16. Grayston says the disappointing result was “part of the businesses’ strategy” as it executes changes across the Red Sheds, also citing factors including a slow start to summer.

“It was always going to cost us more not to take these actions,” he says of the changes.

By contrast, Grayston emphasised Noel Leeming’s “very strong” performance, with its operating profit of $9.2 million showing an increase of 44.1 percent on HY16. In its report, TWG attributed this success to market share gains supported by successful promotional events and offers, together with a focus on margin management. It expects year-on-year growth to soften in the second half as the effect of competitor Dick Smith’s exit from the market wears off.

Grayston described Torpedo7 as repaying the group’s faith, with its still-small operating profit of $2.4 million representing an increase of 41.5 percent over the same period last year. Warehouse Stationery is also holding steady, reporting a 7.4 percent increase over HY16 with an operating profit of $6.5 million.

Part of Grayston’s vision for TWG includes boosting omnichannel investment across the group. He spoke today of two core steps:

  1. Create a robust ecommerce experience. He says the group is currently experimenting how best to satisfy its customers online.
  2. Reduce the assortment in stores. “It’s no longer necessary to carry every item,” Grayston says, explaining that many items can be fulfilled via delivery instead. He intends to have the group capable of executing same-day and three-day delivery.

Grayston also plans to grow the group’s data capability. He says at the time he was appointed in 2015, the company had lots of information but wasn’t consolidating it to a single view of the customer. It’s now starting to get “very rich data” spanning the group as a whole.

Loyalty programmes in the traditional sense are unlikely to be part of the data collecting picture, however. Grayston says that while Fly Buys works for Noel Leeming, the group looked at adopting a traditional loyalty programme more widely, but decided not to, leaning towards a more independent solution instead.

“We don’t believe that we need to partner necessarily with traditional loyalty programmes.”

The group also plans to further implement an Every Day Low Price (EDLP) strategy across the Red Sheds. Grayston says that in order to win over New Zealand’s notoriously discount-driven shoppers, there will be a “re-education” process, but in many categories, particularly essentials, there’s evidence they’d rather have EDLP prices than wait for a sale.

More than 25 percent of The Warehouse’s assortment is already EDLP, he says, explaining that these categories are performing better than the discounted ones.

“It’s vindication from our customers.”

Speaking more broadly, Grayston says it’s obvious to him after his 15 years in US retail that retailers who pursue a high-low strategy struggle more than those with an EDLP. Discount-driven retailers are especially vulnerable to the aggressive growth of pureplays like Amazon, he says.

Grayston says observers can expect to see a lot more experimentation across the TWG group in the future.

“It’s no longer necessary to have long lead times, big bets,” he says. 

​ ​

This is a community discussion forum. Comment is free but please respect our rules:

  1. Don’t be abusive or use sweary type words
  2. Don’t break the law: libel, slander and defamatory comments are forbidden
  3. Don’t resort to name-calling, mean-spiritedness, or slagging off
  4. Don’t pretend to be someone else.

If we find you doing these things, your comments will be edited without recourse and you may be asked to go away and reconsider your actions.
We respect the right to free speech and anonymous comments. Don’t abuse the privilege.


Restaurant Brands turns 22

  • News
  • March 26, 2019
  • Sarah Dunn
Restaurant Brands turns 22

As it prepares to celebrate its 22nd birthday, the listed corporate franchisor foresees a sunny future for the three – soon to be four - multi-site branded food retail chains it manages in New Zealand.

Read more

Linwood businesses struggle in mosque attack aftermath

  • News
  • March 26, 2019
  • Radio New Zealand
Linwood businesses struggle in mosque attack aftermath

A group of Christchurch businesses are struggling to get back on their feet after the attack on their neighbouring Linwood Mosque. Photo: RNZ / Katie Todd

Read more

Farmers account awarded to Clemenger Group

  • News
  • March 26, 2019
  • StopPress Team
Farmers account awarded to Clemenger Group

99 and Colenso BBDO have won the creative and customer experience business for Farmers. The win, after a competitive pitch, sees the advertising account return to 99 after a six-year hiatus.

Read more

Social scoreboard

Zavy and The Register have worked together to create a scoreboard that compares how the top 25 traditional media advertising spenders in New Zealand have performed on social media over the past 30 days, updated in real time.

Concept to closet
Business coverage of New Zealand Fashion Week.
Town centres
A positive retail environment over the past 12 ...
Amazon Arrival
Keeping up with all things Amazon as it ...
The Retail Yearbook 2017
As we battle our way through the busiest ...
Hospitality enhancing retail
Some think food and integrated hospitality offerings will ...
The future is bright
We spoke with four retailers in their twenties ...
Spotlight on signage
At first glance, the humble in-store sign might ...
Red Awards 2016
The Red Awards for retail interior design celebrate ...
Auckland Unitary Plan
Auckland is changing. The Unitary Plan will decide ...
How to open a store
Sarah Dunn considers what it would take to ...
All things to all people
Kiwi retailers share their omnichannel strategies.
Rising stars
Retail's top young achievers.
Delivering on your promises
The sale isn't over until your item is ...
Retail in heartland New Zealand
Retailers keep the regions pumping, but how strong ...
Women in retail help one another. We spoke ...
The changing face of retail
Shifting demographics are creating big changes in New ...
The retail yearbook
With the help of experts in the retail ...
Retail rogues
We put the spotlight on staff training. Jai ...
Here come the giants
Topshop has arrived in Auckland’s CBD, David Jones ...
Window shopping: A spotlight on social media
Sarah Dunn and Elly Strang look at how ...
From retail to e-tail
Ecommerce has become part of the way mainstream ...
Loyalty in the digital age
How are retailers maintaining loyalty? Sarah Dunn, Elly ...
The Innovators | In partnership with Spark Business
Technology is rapidly changing the retail industry as ...

Hemp products go beyond the specialty shelves

  • News
  • March 25, 2019
  • Sarah Dunn
Hemp products go beyond the specialty shelves

Since hemp seeds’ legalisation for growing, manufacture and sale in November 2018, supermarkets have quickly pivoted to include hemp products such as protein powder in their health food and specialty sections, but the trendy ingredient has already found its way into mainstream product categories.

Read more

No longer just for hippies: Is hemp the next coconut oil?

  • News
  • March 25, 2019
  • Sarah Dunn
No longer just for hippies: Is hemp the next coconut oil?

The Naturally Good Expo, held over June 2 – 3 in Sydney, will bring retailers, brands and practitioners together to learn about all things healthy, organic and natural. Among the topics discussed by industry leaders at the expo is the recent legalisation of hemp – it’s popping up everywhere. We asked John Leith of supplier Hemp Oz and speaker Susan Tapper of Holistic Marketing Healthy Sales for more information about this exciting new product category.

Read more

Military-style semi-automatics ban announced

  • News
  • March 21, 2019
  • The Register team
Military-style semi-automatics ban announced

As of 3pm on March 21, a wide range of semi-automatic weapons have been reclassified under section 74A(c) of the Arms Act as requiring an E endorsement on a firearms license. This means they can no longer be sold to those with A-category gun licenses, and their purchase now requires police approval.

Read more
Next page
Results for
About us.

The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!

©2009–2015 Tangible Media. All rights reserved.
Use of this site constitutes acceptance of our Privacy policy.

The Register

Content marketing/advertising? Email or call 022 639 3004

View Media Kit