The Warehouse Group Annual Report and S209 Notice

ANNUAL REPORT
2017
20
17
— A plan to
transform.

02
Highlights
04
Chair’s Report
08
Group CEO’s Report
14
The Board of Directors
Annual Meeting
The Annual Meeting of shareholders of the
Group will be held in the Guineas Ballroom,
Ellerslie Event Centre, 80–100 Ascot Avenue,
Greenlane East, Auckland, New Zealand,
on Friday 24 November 2017 at 10:00am.
20
Our Warehouse Group of Brands
18
Annual 5 Year Summary
42
Community & Environment
66
Health & Safety
70
Financial Statements
95
Independent Auditor’s Report
We are transforming
how our business
works, anticipating
how our customers
want to shop. Here
is our plan of action
for change.
This Annual Report is dated
18 October 2017 and is signed
on behalf of the Board by:
Joan Withers Keith Smith
Chair Deputy Chair
01
OUTLINE

16.0cDividend per share.
Funds raised for charity.
$
5.6m
44.0
%
59.9
%
1
st
$
2,980.8m
Group retail
sales up 1.9%
from FY16.
Launched our first
store within a store
in Auckland.
Everyday low prices –
reinventing the bargain
reached 44% of sales in
The Warehouse.
Group online
sales growth.
18.4
%
Noel Leeming operating
profit increased by 59%.
02
HIGHLIGHTS
HIGHLIGHTS
03

The retail industry is facing
an unprecedented age of
digital disruption, which creates
an entirely new set of consumer
expectations. The ability to
anticipate and respond to
customer needs has never
been more important,
resulting in new business
models and a fundamental
shift in how we operate.
FY17 has marked the start of a significant business transformation for
The Warehouse Group. The weaker trading performance in the first half
of FY17 led to the acceleration of several change programmes, including
a restructuring of the Group’s operating model and the sale of Financial
Services and the Newmarket property. Facing further disruption with the
likes of Amazon coming across the Tasman means that the aggressive
change and simplification to our retail business are our top priorities.
The Board is pleased to report there is encouraging momentum
in a number of key areas, with a robust plan to transform the
business in both the short and long term. The focus for
management during the next 12 months is on executing
against this plan.
Fig. 01
Joan Withers.
INTRODUCTION
05
04
CHAIR’S REPORT
CHAIR’S REPORT

Leadership and Governance
The Board has full confidence in the Executive Team and
their ability to deliver the strategy. With Nick Grayston
as Group Chief Executive Officer, we have the benefit of
someone who has first-hand experience of competing
with the likes of Amazon and the transition to omnichannel
retailing, and can therefore bring insights to help us meet
the challenge of this new consumer landscape here in
New Zealand. The other key benefit has been Nick’s ability
to attract international talent to the business to augment
the Executive Team that was already in place, especially
in the areas of technology, marketing and new business
models. The leadership of the business is in good shape
and is aligned and focused on our transformation plan.
Post year end our founder, Sir Stephen Tindall announced
he would be taking a leave of absence from the Board for
a period of 12 months to focus on other commitments,
in particular securing the necessary infrastructure in
Auckland for the hosting of the next America’s Cup.
In his absence, Robbie Tindall will stand in for Sir Stephen
as his alternate. Robbie has acted as an alternate since 2011.
The Warehouse Group continues to support the
development of governance capability in New Zealand
through the Institute of Directors’ Future Directors
Programme. FY17 saw the conclusion of Malcolm Phillipps’
term on the programme, and we are happy to share the
news that he has since gone on to gain other directorships.
I am also pleased to share that Vena Crawley joined
The Warehouse Group Board as a Future Director on
24 August. Vena is currently the Chief Customer Officer
at Contact Energy where he is taking a lead role in the
transformation of their retail and customer business. We
are looking forward to having someone of Vena’s calibre
on our team, and especially his experience and expertise
in driving customer-centricity within organisations.
I remain focused on ensuring the Board has the right mix
of skills and experience to drive The Warehouse Group
forward in what is likely to be a very different future retail
Our Performance
The Warehouse Group achieved an adjusted net profit
after tax (including discontinued operations) result of
$59.2 million for the full year (FY17), down 7.7% compared
to $64.1 million in FY16 on a like-for-like basis, but
above the guidance range of $54 million to $58 million
previously indicated to the market. Group retail sales for
the year were $2,980.8 million, up 1.9% compared to FY16.
Gross profit of $971.9 million at Group level increased by
1.4% compared to FY16, while costs of doing business of
$864.1 million increased by 2.0% compared to FY16.
Reported net profit after tax (NPAT) of $20.4 million is
73.9% below last year due to a number of one-off items,
including restructuring costs ($12.4 million) and the
goodwill and asset impairments related to the sale of
Financial Services ($40.1 million). Continuing operations
(excluding Financial Services) delivered an adjusted NPAT
result of $68.2 million, which is 1.4% below last year.
Health and Safety
Our Group remains committed to providing a safe
environment for our team, customers, contractors and visitors.
The focus this year has been on embedding a culture of
health and safety awareness and prevention and ensuring
that we have robust reporting throughout the business.
On behalf of the Board, I wish to acknowledge the Group’s
first-ever fatal accident involving an employee of one of our
contractors at our Torpedo7 Fulfilment Centre in Hamilton.
My heartfelt condolences to the family for their loss.
As a Board, we have been dissatisfied by the lack
of a reduction in injury numbers, particularly in The
Warehouse. We do, however, believe this will change
through focused endorsement by leadership, new
technology and from data-driven initiatives.
environment. A yearly independent assessment of our skills
matrix through our Board Performance Review means we
are continuously assessing the key attributes and experience
that are needed to succeed in this age of digital disruption.
Returning Value
The Board is pleased to confirm the final dividend of
6.0 cents per share, bringing the total dividend for FY17
to 16.0 cents per share. This is in line with the dividend
policy of distribution between 75% and 85% of the retail
adjusted NPAT.
The course of FY17 has seen share price under-
performance. Some of this reflects the market view that
retail stocks are vulnerable, especially with the emergence
of Amazon in the region. For The Warehouse in particular,
the vulnerability from a Hi-Lo pricing model has led to
further discounting, which is being countered by our
Everyday Low Pricing (EDLP) strategy. The share price
has also been impacted by a lack of understanding and
confidence in this strategy.
As a result, the Board has worked with the Executive
Team this year to undergo a robust strategy
development process, with a thorough analysis of risks
and opportunities and validation of all assumptions.
We are aware that we also need to do a better job of
communicating the strategy, and in response have
provided far greater specificity and detail on this
alongside the FY17 results announcement.
In addition, the Board will be involved in an Investor Day
with analysts in November, where the Executive Team
will provide further detail on elements of the strategy.
We are committed to improving our investor relations
and ensuring all our shareholders remain informed on
what the future of the business looks like. We also remain
committed to delivering value to shareholders and making
sure the strategy will drive value and the share price.
Looking Forward
We anticipate FY18 to be a year of operational investment in
the business to create the path for future earnings growth.
The earnings drag of Financial Services has been removed
and will be replaced in the short term with some one-off
investments and costs that will drive the transformation
and evolution of the business. The move to EDLP will
lead to a non-recurring impact from the clearance of
discontinued product ranges. We are also facing some
one-off investments that are needed to transition legacy
IT to modern cloud-based systems.
As in previous years, earnings guidance for FY18 will be
given at the end of the second quarter. This will be subject
to the risks and uncertainties affecting trading associated
with customer reaction to our EDLP strategy and the
performance of the business over the critical seasonal
trading period in the second quarter.
We are making some dramatic changes to the business
as we focus on executing against the two arms of
our transformation plan. This includes fixing our retail
fundamentals and investing for the digital future. There will be
some financial pain that we have to endure in the short term.
The Board is confident that we have the right strategy and
team in place to execute this and our long-term goal remains
delivering sustainable profitability and shareholder returns.
Joan Withers
Chair
$
2,98
0.8
m
Group retail sales for the
year were $2,980.8 million,
up 1.9% compared to FY16.
Acknowledgement
James Ogden and Vanessa Stoddart will be leaving the
Board as directors at the forthcoming Annual Meeting.
James has served for over eight years as a director
and has Chaired the Audit and Risk Committee.
Vanessa has served for four years and has Chaired
the People and Remuneration Committee.
Both Vanessa and James have made a significant
contribution to the company and we thank them
most sincerely for their contribution.
RETURNING VALUE & LOOKING FORWARD
CHAIR’S REPORT
06
07
CHAIR’S REPORT
OUR PERFORMANCE, PEOPLE, LEADERSHIP AND GOVERNANCE

This past year at The
Warehouse Group has been
one of refocusing our priorities
and accelerating a number of
planned change programmes.
We have embarked on a
transformation that we believe
will improve performance
across the Group and enable
us to deliver our strategy of
sustainable profitability and
relevance to customers.
Changing Retail Environment
The world is changing at an exponential pace and is creating an
entirely new set of customer expectations. Companies that you never
thought would have existed ten years ago have developed new business
models which have scaled rapidly and dominate the world we live
in, fundamentally changing the way we live our lives. One thing they
all have in common is customer-centricity with personalised
relationships enabled through technology.
Retail is not exempt from this change. Globally we
are seeing shifts in consumer behaviour having a
profound impact on the traditional retail industry,
especially bricks and mortar, as more people
choose to shop online. We are also seeing that
there will be winners and losers as retailers
come to grips with what this disruption
means for how they do business. As I reflect
on this, it has never been more important for
The Warehouse Group to anticipate and
respond to customer needs in order to
stay relevant and to win.
Fig. 01
Nick Grayston.
09
GROUP CEO’S REPORT
INTRODUCTION
GROUP CEO’S REPORT
08

Our Performance
FY17 saw a weak first-half performance, with severe
margin pressures over the Christmas period in The
Warehouse and a below expectation performance from
The Warehouse Group Financial Services. This led to
a disappointing downgrading of earnings guidance in
December. We assessed the causes of this and came to
the conclusion that a continuation of the same business
model would yield a similar result going forward, so
we embarked on a restructure of the business and a
consequent acceleration of transformative initiatives
over the remainder of the year.
A strong second-half performance demonstrates
encouraging momentum for the transformation.
Performance in the second half delivered an improvement
of 13.9% in adjusted net profit after tax for continuing
operations at $23.1 million up from $20.3 million in H2
FY16. Group retail sales in the half were 0.3% up at
$1,368.9 million compared to H2 FY16. Pleasingly, this
improvement came despite the backdrop of the business
undergoing significant change and restructuring.
Overall for the year, Group retail sales were $2,980.8
million, up 1.9% compared to FY16. The Warehouse saw
modest sales growth during the year but encouraging
results to date from the move to Everyday Low Pricing
(EDLP). Warehouse Stationery achieved record operating
profits, with our Print and Copy Centre category delivering
significant increases in sales and gross margin across
the year. Torpedo7 Group demonstrated strong sales
growth, and we saw an outstanding performance from
Noel Leeming Group with operating profit growth of 60%.
Group online sales for the year in New Zealand were $199.9
million, up 18.4% compared to the same period last year.
The Warehouse and Noel Leeming online businesses
recorded an increase of 25.0% and 54.1% respectively, driven
by a mix of promotions and the re-platforming and relaunch
of The Warehouse and Warehouse Stationery online stores.
Key Changes in FY17
This year has seen us make some key changes to our
business to enable us to focus on execution and the
transformation of our retail business.
Operating Model
In January FY17, we made some fundamental changes
to our operating model with the integration of operating
structures and leadership of retail brands, and creation
of centralised support functions. These changes were
designed to remove duplication and reduce complexity.
The restructure in January started the integration of
The Warehouse and Warehouse Stationery from an
operational perspective. Both businesses have similar
retail models and therefore it made sense to merge the
operations, merchandise and marketing functions for both
brands, under the leadership of Pejman Okhovat.
Similarly, we made changes to Noel Leeming and
Torpedo7 under the leadership of Tim Edwards. Both of
these businesses utilise an assisted sales model to drive
retail sales, so there was benefit in bringing them together
to leverage best practice.
In addition, we created centralised support functions in order
to drive centres of excellence, encouraging operational best
practice, process improvement and cost reduction.
Over the remainder of FY17, we have focused on
embedding these new structures and integrating systems
and processes. At this stage, our intention is to maintain
brand differentiation for our customers in the market.
Sale of Newmarket
We originally bought the Newmarket site to secure a
long-term footprint in this key Auckland area. However,
with the challenge of urban property prices and the cost
of construction, retail development in these areas
is becoming more expensive. After extensive discovery
with several potential partners looking at different ways
to develop the site, we concluded that retail was not
the best use to drive a good capital return on the land.
We therefore made the decision to sell the site.
In July 2017, we completed the sale of the property for
$65 million, with a pre-tax gain of approximately $12 million.
The proceeds will be used to reduce debt. The site will
continue to be leased and operated by The Warehouse
Group until it is vacated in October 2018.
Financial Services
The difficult decision to sell Financial Services was
brought about by the realisation of the need to accelerate
and focus on fundamental change in the retail business
and to free up capital that will be needed to support this
transformation. We recognised that we could not continue
to support the capital demands of a sub-scale financial
services business for which it was likely to take a few more
years to achieve break-even. Therefore, we completed
the sale of the business on 9 September to an existing
partner, SBS Bank (Finance Now), for $18 million, with a
resulting impairment on software of $17 million. Diners
Club (NZ) remains, and we are working with Diners Club
International to plan the future of that business.
We plan to continue to offer financial solutions to our
customers, with The Warehouse Group Financial Services
branded products continuing to be offered and supported
by Finance Now. The Warehouse Group Financial Services
brand will remain, as will our core credit card products –
Warehouse Money Visa Card and Purple
Visa Card. Finance Now are also working on launching
other customer offerings to complement these for
The Warehouse Group. We will always continue to deliver
services and solutions that are right for our customers,
but this enables us to do so in a different way.
Our Strategy to Transform
Our strategy of delivering sustainable profitability
and relevance to customers in last year’s annual report,
remains unchanged. As we move to execution, our retail
transformation will be driven by the strategic imperatives
of fixing our retail fundamentals and investing in our
digital future. The transformation will be supported by
technology enablement.
Fixing Retail Fundamentals
The strategy to fix the retail fundamentals is split into
three broad streams of work: the move to Everyday Low
Pricing (EDLP), the simplification of our operating model
and the reduction of complexity.
The decision to move to an EDLP pricing strategy in
The Warehouse has been driven by customers telling us
they want a bargain every day, rather than having to wait
for a sale or special offer. EDLP establishes a clear ‘best
value’ price proposition for our customers, alongside a
simplified product range. These changes will drive richer
margins and cost efficiencies for the business.
By the end of Q1 FY18, we expect EDLP to be at close
to 100%. The remainder of the year will require us to
manage the clearance of discontinued products carefully
whilst monitoring customer response. We feel confident
that it’s the right move for our business and customers.
September saw the launch of an exciting new marketing
campaign: ‘The Warehouse – where everyone gets a
bargain, every day’.
The second stream of work relates to leveraging
operational synergies from the integration of the retail
brands. An example is our Blue into Red pilot where we
are testing the extent to which we can integrate two
brands under one roof with a curated product range.
We launched our first ‘Store within a Store’ at Auckland
Airport Mall with Warehouse Stationery exiting its lease
and moving into the adjacent The Warehouse store.
Trading at the combined store has met expectations in
the three months since launch and we will be completing
further tests in different locations. If successful, this will
give us optionality either to rationalise our overall property
footprint and reduce a substantial existing fixed cost
base or to repurpose leases to other formats. However,
delivering what is best for our customers remains our
primary focus as we consider the success of this test.
The third stream, the reduction of complexity, is about
driving efficiencies and reducing costs by pivoting from a
supply-driven to a demand-led business. This requires us
to become more data-driven, shortening our supply chain
through direct sourcing, increasing our speed to market
and streamlining fulfilment.
These key workstreams will enable the business to
respond faster to identified customer needs.
18.4
%
Group online sales for the year in
New Zealand were $199.9 million,
up 18.4% compared to the same
period last year.
11
10
OUR STRATEGY TO TRANSFORM
OUR PERFORMANCE & KEY CHANGES IN FY17
GROUP CEO’S REPORT
GROUP CEO’S REPORT

Investing in the Future
As we think about retail in an increasingly digital future,
we must make changes and start to invest in becoming a
21st-century retailer. This requires reorienting the business
from product-centricity to customer outcomes, meeting
needs in different ways, through omnichannel digital
capabilities and ecosystems. In some instances, this will
mean partnering with others and redefining how we do
business closer to the point of need, expanding beyond
traditional Brand channels.
The future will also require a culture of innovation with the
adoption of agile methodologies, greater speed to market,
and a test-and-learn approach. We are approaching our
development of digital platforms in this way, beginning
with education, where we are creating a consolidated
shopping platform to enable cross-brand selling, fulfilment
and delivery.
During FY18, we will start to update our technology stack
in order to replace legacy systems, to become more
customer responsive and deliver modern services. This
will be enabled through cloud infrastructure and Software
as a Service (SaaS) applications. We are currently in
discovery mode, although individual elements are already
in flight, such as our foundational data capability.
People and Leadership
It’s important to me that as well as being the first choice
for our customers, The Warehouse Group must continue
to be a great place to work.
This year has been one of change for many of our people
as we begin to transform our business. Despite these
circumstances, our team have continued to achieve excellent
outcomes. An example of this is the tireless work that has
gone into ensuring the integration of systems and processes
for The Warehouse and Warehouse Stationery, with limited
disruption. I am proud to acknowledge that our team, up
and down the country, are working hard to ensure that we
deliver the best possible outcome for our customers.
FY17 has also seen some changes to my Executive Team.
I have made some key international hires to bring skills
and experience to New Zealand, to help us compete
and win against the likes of Amazon. David Benattar
joined us in October 2016 as Chief Experience Officer
and Timothy Kasbe joined in May 2017 as Chief Information
and Digital Officer. I am excited about the experience
and knowledge that both David and Timothy bring to
help augment the team that was already in place. In turn,
they have helped us become a talent magnet, which has
helped us further enrich our expertise, building capability
throughout the organisation.
Embedding a health and safety culture is one of our top
priorities and I’m encouraged by some of the progress
that has been made here, although we can certainly do
more. It was an especially difficult year for us with the
news of the Group’s first fatality. On 21 June 2017, there
was a tragic incident at our Torpedo7 Fulfilment Centre
in Hamilton, involving an employee of a contractor from a
local transport company. Our deepest sympathies remain
with his family.
Following the incident, we have been liaising closely with
WorkSafe to identify root causes and make any required
changes to ensure that this never happens again. We have
also provided ongoing support to our own team members
who were present and have been deeply affected by this
event. This work is ongoing but we are committed to
doing whatever it takes to keep our people safe.
Looking Forward to FY18
Nick Grayston
Group Chief Executive Officer
13
12
PEOPLE AND LEADERSHIP
GROUP CEO’S REPORT
GROUP CEO’S REPORT

Fig. 01–08
From left to right
Joan Withers
MBA, CFInstD
Chair and Independent Non-Executive Director
Sir Stephen Tindall
KNZM, Dip.Mgt, FNZIM, CFInstD,
HonD. DCom Honoris Causa
Founder and Non-Executive Director
Keith Smith
BCom, FCA
Deputy Chair and
Independent Non-Executive Director
James Ogden
BCA (Hons), FCA, CFInstD
Independent Non-Executive Director
Antony (Tony) Balfour
Independent Non-Executive Director
Vanessa Stoddart
BCom, LLB (Hons), PGDip
in Professional Ethics
Independent Non-Executive Director
John Journee
BCom, CMInstD
Independent Non-Executive Director
Julia Raue
MInstD, GAICD
Independent Non-Executive Director
— Reporting
momentum,
with a plan
to transform.
15
14
THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS

Joan Withers
MBA, CFInstD
Chair and Independent Non-Executive Director
Term of office
Appointed Director 23 September 2016,
elected 2016 Annual Meeting
Board Committees
Member of the Audit and Risk Committee, Member of
the Disclosure Committee, Member of the Corporate
Governance Committee and Member of the People
and Remuneration Committee
Joan has been a professional director for 18 years and spent over
25 years working in the media industry, previously holding CEO
positions at The Radio Network and Fairfax Media. Her current
governance roles are Chair of Mercury NZ Limited and The Warehouse
Group Limited and director of ANZ NZ. Joan stepped down from
her TVNZ role in April 2017, after serving eight years as a director.
She is also a Trustee of the Louise Perkins Foundation, and is
Chair of a steering committee working to increase the percentage
of South Auckland Māori and Pacific Island students taking up roles
within the health sector.
Joan holds a Masters degree in Business Administration from
The University of Auckland. She is also a University of Auckland
Distinguished Alumni (2015). Joan is the author of A Girl’s Guide to
Business which was published by Penguin Books in 1998. She was
awarded the New Zealand Shareholders Beacon Award in 2014.
In 2015, Joan was named Supreme Winner in the Women of Influence
Awards and was named Chairperson of the Year at the Deloitte
Top 200 Management Awards.
Sir Stephen Tindall
KNZM, Dip.Mgt, FNZIM, CFInstD, HonD. DCom
Honoris Causa
Founder and Non-Executive Director
Term of office
Appointed Director 10 June 1994,
last re-elected 2013 Annual Meeting
Board Committees
Member of the Disclosure Committee and the People
and Remuneration Committee
Sir Stephen founded The Warehouse in 1982 and grew the company
into a billion-dollar business before stepping down as Managing
Director in 2001. His vision for creating an organisation to provide
support for worthwhile initiatives benefiting New Zealand and New
Zealanders resulted in the establishment of The Tindall Foundation
in 1995, promoting a ‘hand up’ rather than a ‘hand out’ philosophy.
Sir Stephen has seen many personal honours and awards come his
way. In August 2009, he was bestowed the accolade of a knighthood in
recognition of his work with New Zealand businesses and the community.
He has helped ordinary Kiwis reach their potential and is a true leader
across the spheres of business, community and the environment. Through
his investment business K1W1, Sir Stephen has invested in more than 100
New Zealand export-oriented technology companies, with the goal to
help New Zealand businesses thrive on the world stage.
As a further acknowledgement, in 2015 Sir Stephen was named the
Kiwibank ‘New Zealander of the Year’.
Sir Stephen appointed Robert Tindall to be his alternate Director,
effective 1 July 2011.
Keith Smith
BCom, FCA
Deputy Chairman and Independent Non-Executive
Director
Term of office
Appointed Director 10 June 1994,
last re-elected 2014 Annual Meeting
Board Committees
Chairman of the Disclosure Committee and the Corporate
Governance Committee, Member of the Audit and Risk
Committee and the People and Remuneration Committee
Keith has been involved with The Warehouse since Sir Stephen
opened his first store in 1982, initially providing accounting, tax and
corporate advice, and was Chairman from 1995 to May 2011. He has
a long-standing record of leadership as a director and advisor to
companies in a diverse range of industries, including the energy sector,
rural services, printing, media and exporting. He is Chairman of listed
company Goodman (NZ) Limited (the Manager of Goodman Property
Trust) and is a director of Mercury NZ Ltd, Westland Co-operative
Dairy Limited, and several other private companies.
Keith is a past President of the Chartered Accountants Australia and
New Zealand.
James Ogden
BCA (Hons), FCA, CFInstD
Independent Non-Executive Director
Term of office
Appointed Director 4 August 2009,
last re-elected 2015 Annual Meeting
Board Committees
Chairman of the Audit and Risk Committee and Member
of the Disclosure Committee
James brings strong financial expertise to the Board and director
experience across a broad range of industries. He has had a
distinguished career as an investment banker for 11 years, six years
as Country Manager for Macquarie Bank and five years as a director
of Credit Suisse First Boston. Also, James has worked in the New
Zealand dairy industry in chief executive and finance roles for eight
years. In addition to his role as a director of The Warehouse Group,
he is a director of Summerset Group Holdings Limited, a director
of Vista Group International Limited, member of the Investment
Committee of Pencarrow Private Equity and is a member of the
New Zealand Markets Disciplinary Tribunal. Former directorships
include New Zealand Post Limited and Kiwibank Limited.
Antony (Tony) Balfour
Independent Non-Executive Director
Term of office
Appointed Director 15 October 2012,
re-elected 2015 Annual Meeting
Board Committee
Member of the People and Remuneration Committee
Tony has extensive global retail and eCommerce experience with a
strong track record in a diverse range of industries. Most recently,
he was General Manager (Markets) for Icebreaker Clothing with
responsibility for the company’s global business units in New Zealand,
Australia, USA, Canada, Europe and Asia, as well as the development
of the company’s rapidly growing eCommerce and retail business units.
Prior experience includes senior roles in Monster.com and Seek.com,
both successful online recruitment sites. Tony also spent nine years
at Nike in senior general management roles in the USA, Australia and
Asia-Pacific regions. Since 2009, he has been a director of Silver Fern
Farms Limited, New Zealand’s largest meat company. Tony is also
an independent director at Les Mills International (the world’s leading
provider of group fitness programming), Real Journeys Limited (one
of New Zealand’s leading tourism companies) and Mt Difficulty Wines.
Vanessa Stoddart
BCom, LLB (Hons), PGDip in Professional Ethics
Independent Non-Executive Director
Term of office
Appointed Director 17 October 2013,
re-elected 2016 Annual Meeting
Board Committee
Chair of the People and Remuneration Committee
Vanessa was a lawyer by profession. She was previously Group General
Manager of Technical Operations and People at Air New Zealand for
almost 10 years. Prior to this, Vanessa held positions at Carter Holt
Harvey Packaging Australia as Chief Executive and General Manager
Performance Improvement, as well as change management and legal
positions. She is a member of both the Australian and New Zealand
Institute of Directors, an honorary fellow of HRINZ and a Companion
of IPENZ.
Vanessa is an Independent Director for NZ Refinery Ltd, Heartland
Bank Ltd and Alliance Group Ltd. She is a board member of the
Tertiary Education Commission, the Financial Markets Authority,
King’s College and a member of the Audit and Risk Committees
for MBIE and DOC as well as Chair of Global Women.
John Journee
BCom, CMInstD
Independent Non-Executive Director
Term of office
Appointed Director 17 October 2013,
re-elected 2016 Annual Meeting
Board Committee
Member of the Audit and Risk Committee
John has had an extensive retail career which includes executive
experience across sectors that span general merchandise, fashion
apparel, FMCG, consumer electronics, telecommunications and
electricity retailing. Over his 31-year career, he has spent 15 years
with The Warehouse Group, starting as a joint-venture partner in
1990 and progressing through senior roles in operations, marketing,
merchandise, international sourcing and business development, before
taking a role in the UK with a telecommunications company.
He rejoined in 2012 when The Warehouse Group acquired Noel Leeming,
where John was CEO. He is also Chairman of software developer
Flux Federation, fashion retailer Max Fashions and Managing Director
of equipment distributor Southern Hospitality. John has previously
been a non-executive director of multichannel retailer Ezibuy.
Julia Raue
MInstD, GAICD
Independent Non-Executive Director
Term of office
Appointed Director 23 September 2016,
elected 2016 Annual Meeting
Board Committee
Member of the Audit and Risk Committee
Julia is an Independent Director for Z Energy Limited, TVNZ,
Southern Cross Medical Care Society and Jade Software Corporation.
She is also a Member of the Risk & Audit Committee for the Treasury.
Julia has extensive experience in digital and information technology,
business transformation and strategic planning across the airline,
telecommunications and local government sectors, as well as not-for-
profit organisations in New Zealand. Previously, Julia was the Chief
Information Officer of Air New Zealand (2007–2015) and she was
awarded the New Zealand CIO of the Year award in 2009.
Julia is passionate about growing the number of females working in
technology and works with a number of institutions to drive awareness
of IT as a career.
16
17
THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS

— Annual 5 Year Summary
(52 WEEKS)(52 WEEKS)(53 WEEKS)(52 WEEKS)(52 WEEKS)
20172016201520142013
$000$000 $000 $000 $000
SUMMARY INCOME STATEMENTS
The Warehouse
1,761,399 1,760,708 1,718,307 1,665,233 1,591,088
Warehouse Stationery 278,181 279,155 262,780 250,561 231,838
Noel Leeming810,705 752,137 665,628 620,520 390,667
Torpedo7157,726 148,660 131,231 107,658 24,193
Other group operations8,603 13,201 9,276 14,217 9,688
Inter-segment eliminations(35,843)(29,179)(16,801)(9,711)(7,942)
Retail sales2,980,771 2,924,682 2,770,421 2,648,478 2,239,532
The Warehouse84,531 89,376 79,600 76,903 85,186
Warehouse Stationery 15,743 14,288 12,723 11,793 10,321
Noel Leeming19,264 12,050 6,424 11,308 11,011
Torpedo72,675 3,380 34 1,085 656
Other group operations(14,376)(7,929)(5,555)(4,373)4,064
Retail operating profit107,837 111,165 93,226 96,716 111,238
Equity earnings of associate– 723 2,802 3,006 3,464
Gain on business disposals– 9,950 – – –
Gain on disposal of property11,455 5,533 5,533 16,810 77,368
Direct costs relating to acquisitions– – – (951)(2,356)
Contingent consideration– 675 (977)5,259 –
Restructuring costs(12,060)– – – –
Intangible asset impairment– – (12,491)– –
Earnings before interest and tax107,232 128,046 88,093 120,840 189,714
Net interest expense(12,527)(14,154)(15,123)(13,427)(11,675)
Profit before tax94,705 113,892 72,970 107,413 178,039
Income tax expense(23,691)(25,890)(21,148)(27,378)(28,423)
Profit after tax71,014 88,002 51,822 80,035 149,616
Discontinued operations (net of tax)(50,283)(5,526)(2,074)(2,781)(4,288)
Minority interests(302)(4,138)1,562 496 (580)
Profit attributable to shareholders20,429 78,338 51,310 77,750 144,748
ADJUSTED PROFIT RECONCILIATION
Unusual items (detailed above)
605 (16,158)7,935 (21,118)(75,012)
Income tax relating to unusual items(3,132)(2,163)(941)2,751 (327)
Minority interests– 3,614 (1,170)– –
Discontinued operations (net of tax)50,283 5,526 2,074 2,781 4,288
Adjusted net profit 68,185 69,157 59,208 62,164 73,697
THE WAREHOUSE
Operating margin (%)
4.8 5.1 4.6 4.6 5.4
Same-store sales growth (%)1.2 4.1 1.4 3.2 2.0
Number of stores92 92 92 91 92
Store footprint (square metres)501,807 499,547 497,702 494,847 500,769
WAREHOUSE STATIONERY
Operating margin (%)
5.7 5.1 4.8 4.7 4.5
Same-store sales growth (%)(0.3)6.5 1.4 5.3 2.8
Number of stores69 66 65 63 61
Store footprint (square metres)73,216 71,927 70,445 68,194 67,230
NOEL LEEMING
Operating margin (%)
2.4 1.6 1.0 1.8 2.8
Same-store sales growth (%)6.4 14.2 1.0 5.6 –
Number of stores77 75 78 77 75
Store footprint (square metres)73,591 71,169 70,999 69,391 67, 972
DIVIDEND DISTRIBUTIONS
Interim (cents per share)
10.0 11.0 11.0 13.0 15.5
Final (cents per share)6.0 5.0 5.0 6.0 5.5
Ordinary dividends declared (cents per share)16.0 16.0 16.0 19.0 21.0
Basic earnings per share (cents)5.9 22.7 15.2 24.1 46.7
Basic adjusted earnings per share (cents)19.8 20.1 17.2 19.3 23.8
20172016201520142013
$000$000 $000 $000 $000
SUMMARY BALANCE SHEETS
Inventories
491,818 501,713 510,461 492,109 458,109
Trade and other receivables71,088 150,624 86,361 91,253 69,887
Creditors and provisions(336,451)(347,073)(315,565)(328,706)(315,679)
Working capital226,455 305,264 281,257 254,656 212,317
Fixed assets273,300 312,396 386,709 353,376 318,653
Held for sale71,699 52,277 – – –
Investments– – 2,778 5,541 5,671
Funds employed571,454 669,937 670,744 613,573 536,641
Taxation (liabilities) / assets45,870 40,943 18,599 27,485 11,373
Contingent and deferred consideration– (1,000)(3,250)(22,316)(21,759)
Goodwill and Brand Names106,601 129,315 120,092 132,583 100,891
Derivative financial instruments(19,265)(28,619)35,358 (7,653)370
Capital employed704,660 810,576 841,543 743,672 627,516
Net debt218,271 299,980 299,573 220,878 216,874
Equity attributable to shareholders485,522 510,429 540,060 518,926 400,029
Minority interest867 167 1,910 3,868 10,613
Sources of funds704,660 810,576 841,543 743,672 627,516
SUMMARY CASH FLOW
Continuing Operating profit
107,837 111,165 93,226 96,716 111,238
Continuing Depreciation and amortisation58,376 58,210 57,770 51,025 44,017
Continuing Operating EBITDA166,213 169,375 150,996 147,741 155,255
Change in trade working capital21,661 35,198 (35,343)(22,742)(9,243)
Income tax paid(27,454)(28,037)(22,398)(37,492)(40,803)
Net interest paid(16,008)(16,495)(18,662)(13,351)(12,270)
Share based payment expense1,283 3,208 2,114 2,266 2,545
Restructuring costs(12,397)– – – –
Discontinued EBITDA(6,686)(1,930)(929)(2,095)(5,748)
Loss on sale of plant and equipment1,476 1,141 691 2,282 3,965
Operating cash flow128,088 162,460 76,469 76,609 93,701
Capital expenditure(70,575)(75,180)(109,345)(91,010)(93,315)
Advances– – – (17,901)(12,071)
Advances repaid– – – 25,013 –
Proceeds from divestments79,714 45,870 31,120 27,544 195,572
Proceeds from equity raise– – – 114,072 –
Dividend from associate– 2,695 5,565 3,136 4,165
Net dividends paid(52,466)(58,162)(59,640)(58,193)(69,075)
Employee share schemes(2,148)(2,528)(2,455)(2,818)(2,310)
Acquisition of subsidiaries and minorities(1,000)(74,367)(20,043)(80,181)(116,648)
Other items96 (1,195)(366)(275)(4,200)
Net cash flow81,709 (407)(78,695)(4,004)(4,181)
Opening debt(299,980)(299,573)(220,878)(216,874)(212,693)
Closing debt(218,271)(299,980)(299,573)(220,878)(216,874)
FINANCIAL RATIOS
Operating margin (%)
3.6 3.8 3.4 3.7 5.0
Interest cover (times)8.6 7. 9 6.3 7. 4 9.8
Fixed charge cover (times)2.0 2.1 2.1 2.2 2.5
Net debt / EBITDA (times)1.4 1.8 2.0 1.5 1.4
Net debt / net debt plus equity (%)31.0 37.0 35.6 29.7 34.6
Return on funds employed (%)17.4 16.7 15.0 17.3 21.3
Capex / depreciation (times)1.1 1.2 2.0 1.8 2.2
18
19
ANNUAL 5 YEAR SUMMARY
ANNUAL 5 YEAR SUMMARY

FIG. 01 — THE WAREHOUSE PG. 22
FIG. 02 — WAREHOUSE STATIONERY PG. 26
FIG. 03 — NOEL LEEMING PG. 30
FIG. 04 — TORPEDO7 PG. 34
FIG. 05 — FINANCIAL SERVICES PG. 38
20
OUR GROUP OF BRANDS
21
OUR GROUP OF BRANDS
CONTENTS
Fig. 01
Fig. 03
Fig. 05
Fig. 02
Fig. 04

OUR PLAN FOR THE WAREHOUSE
— A plan
to reinvent
the bargain.
Financial Performance – a game of two halves
The financial performance for the core The Warehouse (‘Red’) business was
characterised by similar sales levels to the previous year, but very different
operating profit results in each half.
In the first half of the year, slightly lower margin rates were experienced
due to increased clearance activity relating to our changing pricing strategy
and product range reduction, and a poor Christmas. The cost of doing business
(CODB) also increased year-on-year by 1% at a time when gross profit was
dropping. This resulted in operating de-leverage and a 9% reduction overall
in operating profit for the first half.
In the second half of the year, the sales growth was again flat. However, margins
showed some recovery as the performance of the Head to Toe (Apparel),
accessories and footwear categories was strong, and CODB savings began to be
realised towards the end of the half, following a restructure of the business in Q3.
The second half-year performance is encouraging on two levels: first,
the sales and margin rates in categories moving into an EDLP model give
us some comfort that the strategic shift away from Hi-Lo promotional pricing
to EDLP is working; and second, the first steps in a multi-year programme
to reduce the CODB have been achieved. Many of the more significant
structural cost reductions that we are planning rely on improved operating
processes and efficiencies that will be realised following investments in
technology in future years.
Another benefit of the work carried out on changing to EDLP and range
reduction is that inventory at the end of the financial year is in good shape,
with little seasonal overhang, or aged stock requiring clearance. This means
one less headwind for the business as we approach FY18.
Overall, it was an encouraging end to the year for Red.
Store within
a Store model
New value
proposition
Invest in design
and merchandising
New technology
package
Reinventing
the bargain
Major change to
pricing strategy
23
22
THE WAREHOUSE
FINANCIAL PERFORMANCE
THE WAREHOUSE

Move to EDLP
A major change to pricing strategy was commenced in
FY17. Traditionally, the Red business has been operating
a Hi-Lo price strategy, which sees a range of discounting
and promotional specials offered each week to drive
excitement and to stimulate sales. With technology giving
customers the ability to compare prices from competitors
as they shop, and the advent of global retailers such as
Amazon, who through their buying power can typically
beat or match a discounted price, the future of Hi-Lo
pricing in many categories is bleak.
The Warehouse is changing to an Everyday Low Price
(EDLP) strategy where there is a strong focus on the overall
value proposition of product design, quality, price and range,
with high availability. We plan to move the majority of our
offerings into EDLP, noting that in some categories and
for seasonal events, some targeted promotional activities
still have a role to play for The Warehouse.
FY17 saw much of the foundational planning work
undertaken around the transition to EDLP, and the start
of changes to the Apparel and Homewares categories,
which by the end of FY17 are both at or over 50% EDLP.
FY18 will see a continuation of the programme, with the
objective of completing the bulk of the transition to EDLP
by year-end.
The financial impact of the transition is in clearing and
discontinuing stock lines that will not be part of the EDLP
offer in the future. In addition, investment in design and
merchandising has been made to improve the appeal of
products being sold. Under an EDLP model, we expect
potentially lower sales volumes, but at an overall stronger
margin rate given the lack of discounting. The EDLP
model will also drive significant gains in productivity as
products do not require the same intensive management,
repricing, or moving around the store as they would under
Hi-Lo. Our marketing also needs to change to develop
new ways to excite the customer to drive foot traffic into
stores. A focus on ‘Reinventing the Bargain’ is part of
taking customers on this journey with the business.
Within our team, we have people experienced in EDLP
environments and in making this transition. There are many
international models to point to for examples of how it has
been done well, and what pitfalls to avoid. Our second-half
performance in Red has been encouraging as the EDLP
categories have performed favourably.
Red and Blue Together
A key strategy for the organisation is the integration
of the Red and Blue (Warehouse Stationery) businesses,
first in the back office and then at operational levels.
A restructure was announced in February/March under
which we consolidated the management and operational
functions of the two businesses into one. A major systems
project was commenced at the start of Q4 to move all
of the operational support, merchandising, inventory
management and customer-facing systems (e.g. point
of sale) onto the Red platforms. This was completed
in September allowing the business to operate as an
integrated trading entity early in the new financial year.
As a change-management project this was complex, with
many different elements involved. While there was some
disruption to the business, the completion of the project
within a very tight time frame, is a strong indicator of the
business’ ability to execute its strategy and make bold
change rapidly.
In FY17, we piloted the integration in the market of Red
and Blue stores, with the implementation of a ‘Store within
a Store’ (SWAS) model at our Airport store in Auckland.
During FY18, we plan to test and pilot a number of other
locations with the objective of learning how an in-market
integration of the two Brands’ offerings might work, how
customers both in the B2C and B2B segments respond, in
order to inform a broader programme of integration. With
the challenges on traditional retailers, it is imperative for
the Group to optimise the use of its floor space, and to
drive profitability. Potentially co-locating or integrating the
Blue offering into Red stores may unlock significant fixed
cost savings for the business; however, such a change
needs careful planning to ensure that customers’ needs
are our primary concern.
During FY18, we plan
to test and pilot a
number of other
locations with the
objective of learning
how an in-market
integration of
the two Brands’
offerings might work.
Fig. 01
A plan to integrate The Warehouse
and Warehouse Stationery.
Fig. 02
The Warehouse
Royal Oak, Auckland.
Fig. 03
Team member
and customer talk
Active Intent.
Fig. 04
#MyWarehouseStyle.
24
25
THE WAREHOUSE
RED AND BLUE TOGETHER & MOVE TO EDLP
THE WAREHOUSE

OUR PLAN FOR WAREHOUSE STATIONERY
Financial Performance – another record-breaking year for Blue
– Everything you need to Work, Study, Create and Connect
Warehouse Stationery (‘Blue’) recorded another consistently strong result
with earnings before interest and tax (EBIT) increasing to $15.7 million. This
is the highest EBIT ever recorded by Blue. While sales were flat, market share
increased and we continued to deliver everything our customers need to Work,
Study, Create and Connect. Very careful management of cost of doing business
(CODB) helped to achieve this EBIT result.
Key Strategic Priorities
1. Brand Strategy – continue to build the strength of the brand, a loved
and trusted partner
2. Products and Services – curated product range and market-leading range
of copy centre and digital creative product
3. e-Commerce – innovate and develop our online experience
4. Customer Experience – seamless experience across all channels
5. B2B and Education – increase market share in the B2B and Education sectors
6. Integration and Operating Model – new operating model which transitions
our business, people, capability and culture for the future
Building strength
into our brand
Innovating
e-Commerce
Seamless customer
experience
B2B and
Education
increase
New integration and
operating model
27
26
WAREHOUSE STATIONERY
FINANCIAL PERFORMANCE AND KEY STRATEGIC PRIORITIES
WAREHOUSE STATIONERY
— A plan to
deliver to our
customers’
needs.

Products and Services
Our product range has continued to develop during the
year. More of our stores are carrying a range of Apple
products and our Ink and Toner offering continues to be
market leading. Print and Copy Services have continued
to show significant growth with customers enjoying the
new creative services we have introduced. We have also
rolled out new Fujifilm Digital photo equipment across
the store network.
Our seasonal Furniture catalogue continues to give us
range authority in this category, we have the widest range
of writing with our loose pen rollout and we launched
Lenovo, a major PC brand.
Back to School and Education Sector
We continue to be the Number One destination for Back
to School. Once again, the Back to School trading period
was extremely competitive. We delivered the widest
choice and offering to both parents and schools.
We have seen significant market share in the Education
sector. We intend to continue to leverage opportunities in
this area to remain a trusted partner for the sector.
People and Capability
Once again, we were recognised by IBM Kenexa as a
Finalist in their ‘Best Workplaces’ employee engagement
survey. Our CARE (Connect, Ask, Recommend, Execute)
internal development programme, together with other
capability programmes, are all part of ensuring we can
provide our customers with great service and advice
every time.
Store Network and Store within a Store (SWAS)
We added three new stores during the year, bringing
the total number to 69. The new stores are located at
Tauranga Crossing, Hawera and Johnsonville.
Our Airport store (Auckland) has relocated to within
our Red (The Warehouse) store. This is providing a
SWAS experience for our customers. We intend to trial
this approach with a few of our stores to assess trading
performance and customer experience.
Integration and Operating Model
We have commenced a significant integration programme
of people, processes and systems to operate both of
our brands: Red (The Warehouse) and Blue (Warehouse
Stationery). Central to this will be a people and capability
plan which builds on the ‘Way of Working’ within our
organisation and ensures the future success of our teams.
Fig. 01
Discussing
features and benefits
with a customer.
Fig. 02
Price checking
technology.
Fig. 03
Team members
discussing
promotional activity.
$
15.7
m
Warehouse Stationery recorded
another consistently strong
result with operating profit
increasing to $15.7 million.
29
28
WAREHOUSE STATIONERY
PRODUCTS, BACK TO SCHOOL, PEOPLE, STORE NETWORK AND INTEGRATION
WAREHOUSE STATIONERY

OUR PLAN FOR NOEL LEEMING
— A plan
to deliver
passionate
expertise.
Financial Performance – a standout
The financial performance for the Noel Leeming business was characterised
by strong sales growth, improvement in margins, and reductions in cost
of doing business (CODB). Overall, it was a standout performance from
Noel Leeming, increasing operating profit year-on-year by 60%, delivering
a profit performance uplift from 1.6% to 2.4% of sales.
In the first half of the year, the sales momentum that had been built at the end
of FY16 continued, with double-digit sales growth year-on-year of 11.1%. Sales
growth slowed as expected in the second half of the year, while the business
cycled the Dick Smith exit from the market in the comparative period, with H2
sales growth of around 3%. Margin growth was flat on H1, but was up 60 points
in H2 to 21.2%.
Market share
1
growth continued to be strong. In FY17, the total market
increased in dollar value by 2.9%, while Noel Leeming sales grew by 7.4%.
All channels delivered growth for Noel Leeming, with the commercial profit
growing by 15% and online profit 118%. Despite this growth, working capital
and inventory levels remain similar to last year.
Noel Leeming expanded its store network by a net two stores during the year,
opening stores in Takapuna and Tauriko (Tauranga Crossing).
Overall, it was a very strong performance from Noel Leeming.
Investing in our
store network
Personalised customer
conversations
Adding value through
our tech offering
Extend product
knowledge and
team expertise
1
GFK market share excludes all whiteware products.
31
30
FINANCIAL PERFORMANCE
NOEL LEEMING
NOEL LEEMING

60
%
Overall, it was a standout
performance from Noel Leeming,
increasing operating profit
year-on-year by 60%, delivering
a profit performance uplift from
1.6% to 2.4% of sales.
Services Business
In Noel Leeming, our purpose remains to make Kiwi lives
better through technology and, as market leaders and the
authority on product, we will continue to deliver on this.
Our strategy remains to provide the right product at the
right price through passionate people providing expert
service together with leading services.
Personalised conversations with our customers cement our
position as a loved and trusted brand, with myNoelLeeming
membership currently in excess of 500,000 Kiwis. This
enables us to gain a deeper understanding of our customers
and connect in relevant and more meaningful ways.
The 1600 passionate experts in our stores enable us to
provide outstanding product knowledge and our recent
partnership as the ‘Tech Expert’ with TVNZ reinforces our
position as the authority on technology and appliances.
In FY18, we will work closely with our suppliers to
ensure we continue to be first to market with new
products and technology.
By continued focus on capability and learning, we will
extend the product knowledge and expertise of our team
members, and through maintained focus on a health and
safety culture, we will ensure our team members and
customers remain safe in all that they do.
Services remains our point of difference, adding value
to our customers through our Tech Solutions offering.
This enables us to ‘connect’ with our customers, assisting
them with the set-up, installation and delivery of their
products, along with the ability to learn, connect and share
through our stores and in their homes or business premises.
FY18 will see us extend Tech Solutions to all stores and
launch a new services product (My Tech Solutions) to
further enrich the value offered to our customers.
Whilst the online business grows, the store network –
combined with our passionate experts – remains key to
servicing our customers’ needs. Investing in our store
network is an ongoing priority and FY18 will see us
continuing with our refresh programme, as well as adding
two new stores to the network. In addition, we will be
trialling several new ‘Click and Collect’ concepts.
Continued profit growth remains a focus with improving
gross margin a key initiative through better product life-
cycle management and maximising strong partnerships
with our suppliers. We will also remain focused on our
key assets of people, space and inventory to maximise
productivity and build process efficiencies.
‘Passionate Experts’ and ‘End to End’ service for our
customers is still at the heart of everything we do.
Noel Leeming and Torpedo7 Group –
Combined Operations
As part of the Group strategy, the management and
support functions for Noel Leeming and Torpedo7 have
been integrated during the second half of the year. This
recognises that both businesses have similar assisted sales
models and requirements for in-depth product knowledge
and customer service. Focusing primarily on the online
channel, Torpedo7 is a relatively new player to traditional
bricks-and-mortar retailing, and will benefit greatly
from the retail depth, sales disciplines and performance
management practices within Noel Leeming. Similarly,
Noel Leeming can gain more online trading expertise from
the Torpedo7 team.
Unlike Red and Blue together, there are no plans to trial
any in-store integration, but there is potential to expand
Torpedo7’s physical presence in areas where the Red and
Blue integration goes ahead.
Fig. 01
Passionate
team member,
happy customer.
Fig. 02
Updating on
product knowledge.
33
32
NOEL LEEMING
NOEL LEEMING AND TORPEDO7 GROUP – COMBINED OPERATIONS AND SERVICES BUSINESS
NOEL LEEMING

OUR PLAN FOR TORPEDO7
— A plan to be
the leader in
outdoors and
adventure.
Financial Performance – positioned to grow
Total Torpedo7 Group sales grew by 6.1% in the year to $157.7 million, with
strong growth coming from the 1-day business (an increase of 15.6%) and the
retail stores (up by 15.7%) offsetting a decline in the Torpedo7 online business
and in the No.1 Fitness and Shotgun brands.
Margin pressure from clearing aged inventory and a one-off inventory
adjustment of $0.6 million in No.1 Fitness led to reduced gross profit
percentage of 24.4% compared to last year of 25.7%.
Encouragingly, as part of the Torpedo7 turnaround plan, the H2 focus
on cost of doing business (CODB) savings resulted in a decline in CODB
as a percentage of sales, 22.7% compared to last year of 23.4%.
Overall, operating profit declined by 20.9%, from $3.4 million in FY16
to $2.7 million in FY17.
Torpedo7 opened a clearance store during the year in Newmarket, Auckland.
Best range at the
right prices
Defining brand clarity
– ‘See You Out There’
Improve in-store
experience
Relaunch Over and
Above Club
Improve product
supply base
35
34
TORPEDO7
FINANCIAL PERFORMANCE
TORPEDO7

Moving Forward
In Torpedo7 Group, our strategy is to grow the profitability
of the Torpedo7 business and nurture the successful
1-day business.
We are building the Torpedo7 brand to be New Zealand’s
authority on outdoor and adventure gear, with our team
of passionate enthusiasts ensuring we have the best range
at the right price for our customers.
Key to our success is the down-to-earth attitude of our
committed team members who inspire our customers
to want to ‘Get Out There’ no matter what their abilities.
In FY18, we will work closely with our suppliers to make
sure we enhance our team’s knowledge to give them
opportunities to live and breathe our product range.
The key focus for FY18 will be on defining brand clarity
and understanding our customers in order to help
us better meet their needs. This will result in refining
and curating our product offering, cultivating external
partnerships with brands whilst maximising our Torpedo7
branded product potential. Focus continues on inventory
control, and better life-cycle management of product will
enable us to improve our gross profit margin.
Customer experience in our stores and online remains a
high priority. Following the learnings from our Albany site,
our current flagship store, we will improve the in-store
experience across the network and also look to increase
the number of stores, the first of these new stores being
at Westgate in Auckland. In addition, we are making
changes to the look and feel of our three online stores:
Torpedo7, No.1 Fitness and Shotgun.
Our end-to-end bike, ski and snowboard workshops
and hire service offerings are an integral part of what
differentiates the Torpedo7 business from our competition.
The services crew, who live and breathe the outdoors,
provide expert mechanical and technical service along with
practical solutions and advice to inspire adventurers.
In FY18, we will relaunch our Over and Above Club, to add
more value for our customers and to enable us to personalise
our interactions. Working closely with the community,
both through Torpedo7 events and by our work with the
Hillary Foundation, we will encourage our customers to
make the most of the outdoors.
Driving profit through sales growth and cost control
will be key to the financial success of FY18. We will be
evaluating the efficiency of key business processes,
streamlining our systems and methods as we combine
the Torpedo7, No.1 Fitness and Shotgun businesses,
and fostering a culture of continuous improvement.
For the 1-day.co.nz business, the strategy is to continue
to nurture this entity. We plan to grow sales by further
expanding our database and driving greater customer
engagement through social media. We will also be
improving our product supply base and leveraging the
wider Warehouse Group sourcing team to optimise
speed to market. Through further development of
existing fulfilment capacity, we will continue to delight
our customers. As with the other brands in the business,
we will review our processes on an ongoing basis, with
the intention of streamlining costs, whilst investing in
capability and the areas of our business that will drive
increased profitability.
In summary, the future is exciting for the Torpedo7 Group
business. See you out there!
Fig. 03
Ensuring customers
get the right product
for their needs.
Fig. 02
Expert mechanical
knowledge.
Fig. 01
Living and breathing
the product range.
6.1
%
Total Torpedo7 group sales grew
6.1% in the year to $157.7 million,
with strong growth coming from the
1-day business (up by 15.6%) and
the retail stores (up by 15.7%).
37
36
MOVING FORWARD
TORPEDO7
TORPEDO7

OUR PLAN FOR FINANCIAL SERVICES
— A plan
to de-risk
through
divestment.
Financial Performance
The Financial Services business reported an $8 million operating loss for the
full year. The first half’s results were disappointing, with the combined effects
of slower revenue growth and a lower asset base than was expected delivering
a weaker performance than had been planned.
A major contributing factor was the lower level of participation and use of
the Financial Services credit cards from the customer base that came across
as part of the acquisition of Westpac’s share of our Joint Venture business.
Higher write-offs as inactive customers required more collections effort were
also a contributing factor.
This weaker performance created an impairment challenge for the business
at the half year, as the $22.7 million of goodwill on the balance sheet required
valuation support of projected future cash flows. Consequently, in the H1
financial statements, the business impaired all of the goodwill, due to the
uncertainty in cash flows ($11.0 million relating to Diners acquisition, $11.7 million
relating to the Westpac acquisition).
Future financial
services strategy
De-risk
financial investment
Continue to support
product innovation in
financial services
39
38
FINANCIAL SERVICES
FINANCIAL PERFORMANCE
FINANCIAL SERVICES

As with all businesses that are in an investment phase,
Financial Services was under close review by both its
independent board from a performance standpoint and
the parent board from an investment perspective. In early
2017, we appointed Donna Cooper to the role of CEO for
Financial Services to assist with execution of the strategy
and to better understand our retail customers’ needs to
inform future product offerings. As part of that work it
became clear that our future financial services strategy
should be centred around more digital, platform-type
offerings than traditional credit manufacturing.
With the acceleration of our retail transformation strategy
in early 2017, a decision was made to de-risk the financial
investment that Financial Services represented to the
Group. We decided to seek a partner who would continue
to be a finance partner for the retail businesses, as well
to as support the product innovation in financial services
that originally drove the Group’s entry into that sector.
Sale
The sale of Financial Services to Finance Now (a subsidiary
of SBS Bank) was announced in July and completed in
early September for a purchase price of $18 million. The
price reflected a discount on net assets in the business,
as it is loss-making, and the transaction was a sale of the
business as a going concern rather than as an asset sale
with associated wind-up costs. As the FY17 balance date
fell prior to the completion of the sale, the discount on sale
has been reflected in the financial statements as a further
impairment on the intangible (software) assets in the
business. Throughout the sale process, the team remained
focused on executing many improvements in the business
and the second half result was in line with our revised
half-year expectations.
The Warehouse Group continues to own Diners Club
(NZ) but that business is classified as discontinued and
assets as held for sale. We are now working with Diners
International to plan the future of that business.
$
18
m
The sale of Financial
Services to Finance Now
(a subsidiary of SBS Bank)
was announced in July
and completed in early
September for a purchase
price of $18 million.
Encouraging operational
best practice, process
improvement and
cost reduction
Centralised
support functions
Accelerating planned
change programmes
Driven to deliver our
strategy of sustainable
profitability and
customer relevance
Changes to our
operating model
OUR PLAN FOR THE WAREHOUSE GROUP
Establishing centres
of excellence
40
SALE
FINANCIAL SERVICES
41
OUR WAREHOUSE GROUP OF BRANDS

Supporting communities
and the environment is
part of our DNA.
$
5.6
In total across the Group,
more than $5.6 million
was raised and donated
during FY17.
The Warehouse Group’s involvement in the community and environment
has been strengthened further over the past year, with corporate social
responsibility becoming a key pillar of the Group’s strategy.
FY17 has been a transformative year for our community and environment
initiatives. Fundraising across the Group has gone from strength to strength
and new collaborative partnerships have been established. This has enabled
us to take a real stance on issues affecting our society today.
In total across the Group, more than $5.6 million was raised and donated
during the financial year.
Our environment strategy has evolved. The Group’s focus on cleaner and
greener products continues, with an even greater emphasis on engaging
and inspiring customers to help them live sustainable lives.
We believe education is critical to ensuring a successful and prosperous country
where every Kiwi can flourish. Going forward, our community and environment
initiatives will increasingly be focused around education, with some exciting
new partnerships and programmes planned for the coming year.
m
43
42
INTRODUCTION
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT

Fig. 01
Youthline cheque
presentation,
16 October 2016.
Fig. 02
Staff enjoying a visit
from Harold and the
Life Education team.
Fig. 03
Christmas celebration
in partnership
with Variety – The
Children’s Charity.
The Warehouse is an iconic part
of the make-up of New Zealand’s
communities, and this lives through
our collaborative community
partnerships. In FY17 we partnered
with five organisations at a
national level, centred around
initiatives that improve outcomes
for young people and their
whānau –supporting them
with their education, well-being
and youth employment.
Fig. 04 — Variety – The Children’s Charity
Almost one in three Kiwi children are growing up without
the basics. Our partnership with Variety raised funds
to help level the playing field for disadvantaged kids,
particularly with their education. With the funds raised
through The Warehouse, children are given a good
start in life by covering basic unmet needs like clothing,
prescriptions, doctor’s bills and school stationery. They are
also given opportunities that they’d otherwise miss out on,
such as the chance to play sport or go on school camp –
helping them reach their full potential.
Fig. 05 — Life Education Trust
The Life Education truck turning up to school with
Harold the giraffe, is often a highlight of the year for
many Kiwi kids. Our partnership with Life Education
Trust provides at-risk children an opportunity to attend
the classroom modules, which empowers them to make
healthy choices so they can live full lives. Funds raised
through The Warehouse also helped Life Education Trust
to adapt their teaching methods from paper-based to
a digital platform so they can engage children further.
Fig. 06 — Women’s Refuge
Children are often seeing, hearing and getting caught in
the middle of family violence. In fact, just under half of
Women’s Refuge’s clients are children. The effect of this
exposure can be devastating. The fundraising campaign
we ran for the Women’s Refuge ‘Kids in the Middle’
initiative funded child-advocates to be based in refuges
across the country. These advocates provide around-the-
clock, wrap-around support for children in the form of
counselling programmes and one-on-one guidance.
Fig. 07 — The Parenting Place
Being a great parent is the most valuable job in the world.
Attending one of The Parenting Place’s Toolbox parenting
courses is often a life-changing education experience.
Over a number of weeks parents learn activities and
strategies they can apply at home, all in a relaxed setting
facilitated by trained volunteers who are friendly and
supportive. The funds raised provided vulnerable families
in local communities the opportunity to attend one of
these courses.
Fig. 08 — Youthline
Youthline supports young people in need and their
families anytime, day or night. Their vision is to create
communities where young people thrive. Thanks to
generous customers who donated during our fundraising
campaign, Youthline have been able to launch their
‘GoForward’ digital strategy. This delivers counselling by
technology, like GoChat – which bridges the gap between
phone and text counselling, GoMobile – a text counselling
programme, and GoLive – an online counselling option.
Fig. 04Fig. 05Fig. 06Fig. 07Fig. 08
44
45
COMMUNITY & ENVIRONMENT
THE WAREHOUSE
COMMUNITY & ENVIRONMENT
THE WAREHOUSE

Pedalling for Our Tamariki
In March 2017, more than 160 team members from
The Warehouse and Plunket hopped on their bikes for
a 16-day cycle relay – the length of the country! This
was the second year we’ve run the Pedal for Plunket
campaign, with funds this year supporting Plunket
community services. These services ensure that all families
can connect with their community to provide a safer,
better place for children to grow up in.
Olympic cyclist Alison Shanks joined us on the journey
as our ambassador. Alison motivated our team, provided
handy training tips and tricks, encouraged donations and
supported at Pedal for Plunket events around the country.
In total, cyclists rode more than 3,800 kilometres of
winding New Zealand roads, stopped at 88 of our stores,
and took countless selfies along the way. Our stores
and local Plunket volunteers joined in to put the ‘fun’
into fundraising – they provided energetic welcoming
committees when cyclists flew through cities, rattled
buckets for donations, put on bake sales and hosted
sausage sizzles.
Thanks to the generosity of our customers, we presented
Plunket with a cheque for $456,460 at the end of the event
– significantly up from the first campaign in 2015.
In addition, this year donations to Plunket from approved
car seats sold in The Warehouse reached $38,390.
Work-readiness for Young People
A highlight this year was launching Red Shirts in the
Community officially – a partnership with the Ministry
of Social Development. This means that over the next
year, 1,000 young Kiwis aged 16 to 24 who are not
currently in employment, training or education will
receive vital foundational skills through work experience
in The Warehouse stores.
Participants in the programme receive training in
retail customer service, communication skills, personal
presentation, merchandising, and health and safety.
Participants receive a certificate of participation and a
verbal reference, which they can use while seeking a job.
Where possible, participants can also earn credits towards
a National Certificate in Retail (Level 2 NCEA) and a
Customer Service Award.
The initiative has had proven success. A total of 70% of
participants who completed the pilot programme gained
some form of paid employment within three months of
completing the programme.
We believe that businesses have an important role to play,
contributing to the development of a country where all
youth can flourish. Red Shirts in the Community is believed
to be the largest employer-led youth employment initiative
in New Zealand. We are working with the Ministry of
Social Development to develop a framework that other
organisations can use to roll out similar programmes for
young people. We are looking forward to continuing
to measure the outcomes and success levels of this
innovative programme in the coming year.
$
456k
Thanks to the generosity of our customers,
we presented Plunket with a cheque for
$456,460 at the end of the campaign.
Fig. 09
Pejman Okhovat, CEO TWL and WSL,
and Amanda Malu, CEO of Plunket, at the
starting line of the Pedal for Plunket event.
Fig. 10
Helping Our Team to Get Ahead Financially
We extended our successful ‘You and Your Money’
financial literacy programme this year, conducting 21
courses for 192 team members of The Warehouse. This
educational programme is run in partnership with the
Commission for Financial Capability and directly links
to the Government’s National Strategy for Financial
Capability, ensuring everyone is prepared to get ahead
financially. It covers everything from budgeting, managing
debt, savings, investing and preparing for retirement.
A total of 94% of our team members who participated in
the programme this year found the course “very useful”.
They reported a general increase in their own financial
knowledge and capability, and believe it will help them
to make the most out of their money for themselves and
their whānau.
Grassroots Community Support
In addition to our national programmes, we believe it’s
important to work at a local level, supporting causes and
needs that matter to communities. This is why each of
our stores partners with neighbourhood organisations,
providing more than $1 million of support over the year
through various ways, such as our iconic community BBQs,
proceeds from our 10c plastic bags and product donations.
Our nine trading regions continued to partner with
organisations in their area. These regional partnerships
funded everything from educational zoo visits for
low-decile schools through The Warehouse Zoofari
programme, to providing free books for schoolchildren
to assist their reading skills through Duffy Books.
Supporting Communities in Need
We believe it’s important to do all that we can to support
those who are vulnerable during disasters and in times
of need. In emergency situations, we partner with
organisations who are on-the-ground co-ordinating
recovery efforts and providing support.
The Kaikoura earthquake disrupted communities
significantly and, in some cases, our business operations.
We worked with New Zealand Red Cross, which had
teams locally providing emergency aid and ensuring
everyone had the support they needed. Our customers
donated generously to the Red Cross Earthquake Appeal
we ran in The Warehouse stores.
In April 2017, flooding in Edgecumbe impacted and
displaced hundreds of families. Once again we worked
with Red Cross co-ordinating flood-relief kits for those
affected around the Bay of Plenty region.
Fig. 11
Minister Tolley
addressing
Red Shirts at a
community launch.
Fig. 12
The Warehouse Lincoln Road
presents a cheque to
Seed2Harvest, one of their
Customer Choice partners.
46
47
THE WAREHOUSE
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT
THE WAREHOUSE

National and Regional Fundraising
August 2016 to July 2017
$
355,044
$
343,708
$
340,727
$
265,504
$
251,983
$
456,460
$
2,013,426
$
758,814
Local and Other Fundraising
August 2016 to July 2017
$
119,712
$
367,240
$
545,475
$
1,032,427
$
273,325
$
4,077,992
Fig. 13
Grand total national, regional and
neighbourhood fundraising for FY17.
Variety – The Children’s Charity
Women’s Refuge
The Parenting Place
Youthline
Total National Fundraising
Total Regional Fundraising
Life Education Trust
Coin boxes
Bags for Good
Total Local Fundraising
Other Fundraising
BBQ fundraising
We’re all about helping
Kiwis to do great things,
and Warehouse Stationery’s
education-focused community
partnerships are an essential
part of this. Our team is
passionate about making a
difference – this deeply-ingrained
passion came through in
very successful fundraising
campaigns for our national
partners CanTeen and The
Salvation Army, and our various
regional partners, reaching
record amounts in some cases.
Fig. 14
A Warehouse Stationery
team member invites a
customer to add a
donation to their purchase.
Pedal for Plunket
48
49
COMMUNITY & ENVIRONMENT
WAREHOUSE STATIONERY
THE WAREHOUSE
COMMUNITY & ENVIRONMENT

Making Tertiary Education Accessible
As part of our commitment to making education
accessible and affordable for every Kiwi, we are proud to
offer scholarships that support up to six ambitious young
New Zealanders to complete tertiary education every year.
These young people would otherwise not have been able
to afford to study.
FY17 was the second year of the Warehouse Stationery
Scholarships. Along with funding their tertiary study, we
provide every recipient with employment in one of our
stores to assist with living costs. They also receive full
wrap-around support, including mentoring and courses
that help them maximise their chances of successfully
completing their qualification.
In the coming years, we plan to increase the number of
scholarship recipients. We are also extending the selection
criteria to include participants of The Warehouse’s Red
Shirts in Community programme.
Getting Education Back on Track
Often when young people go through cancer their whole
life is put on hold and their education is affected. CanTeen
believes that life shouldn’t stop with a diagnosis of cancer,
and that no young person should ever face cancer alone.
Education is so critical to the success of our young people. The
funds donated generously from our customers help CanTeen
support young people to get their lives back on track, giving
them the strength and resources to reconnect and return to
their education. During FY17, we raised $172,837 for CanTeen.
Aspiring to Greater Things
Life can be tough for young people, which is why our
partnership with The Salvation Army continued to fund
Aspire programmes this year. Aspire is a year-long youth
development programme that helps at-risk young people
overcome their barriers, grow and develop, connect positively
with others, take responsibility and master essential life skills.
Aspire has now been running for three years. The Salvation
Army works directly with schools to identify and help
young people who may be at-risk. The $163,250 raised
for The Salvation Army in FY17 will help these youth
aspire to greater things.
Fig. 16Fig. 15
$
172,837
$
163,250
Raised for CanTeen
Raised for The Salvation Army
Fig. 17
Shari French, GM of
Community Relations,
presents a cheque
to Shane Chisholm,
Territorial Public
Relations Director of
The Salvation Army.
Fig. 18
Teens from
CanTeen.
Fig. 19
Youth supporting
CanTeen.
Fig. 20
The Salvation Army
promotes the Red Shield
Appeal in Warehouse
Stationery stores.
Research completed
as part of the programme
showed a significant increase
in key attitudinal indicators,
such as an increase in young
people’s confidence to
reach their goals.
Aspire is a year-long youth development
programme which helps at-risk young
people aspire to greater things.
50
51
WAREHOUSE STATIONERY
COMMUNITY & ENVIRONMENT
WAREHOUSE STATIONERY
COMMUNITY & ENVIRONMENT

$
485,274
Fig. 21
Grand total national and regional
fundraising for FY17.
National Fundraising
August 2016 to July 2017
$
172,837
$
163,250
$
336,087
Regional Fundraising
August 2016 to July 2017
$
13,928
$
32,898
$
20,612
$
51,338
$
30,411
$
149,187
CanTeen
The Salvation Army
Total National Fundraising
Scouts New Zealand
Child Cancer Foundation
Duffy Books
The Key to Life Charitable Trust
Bluelight
Total Regional Fundraising
Making Kiwi lives better is
what Noel Leeming is all about.
We strive to create positive
outcomes in the education
space and demonstrate our
commitment to New Zealand
communities.
Enhancing the Education Experience
In FY17, we launched the Community Learning Programme.
This initiative evolved from our successful Mobile Learning
Centre, which has now completed its two-year road trip
around New Zealand.
We have partnered with 24 low-decile primary schools,
delivering 2,500 hours of free learning sessions to teachers
and their students. Our mission is to help teachers better
understand how they can use technology to enhance the
experience for their students, create opportunities and
help them to discover new learning pathways.
Our Tech Solutions team members across the country
deliver tailored learning experiences – covering everything
from coding, robotics, 3D design, virtual reality and
educational learning platforms. We are excited to watch
the success of this programme and measure its outcomes
over the year ahead.
Supporting and Mentoring Youth
Noel Leeming established a partnership in FY17 with First
Foundation – an educational trust which gives academically
talented young Kiwis a ‘hand-up’ to tertiary education. The
programme provides students with financial support, paid
work experience, advice, guidance and a supportive mentor.
Our partnership is not just about funding education for
students. After being blown away by the calibre of the
programme applicants, we saw an opportunity for our
team to engage and mentor the talented young people,
assisting them with the major transitions they face moving
from school to university life. We now have several of
our lead team mentoring youth through the programme,
including CEO Tim Edwards.
Fig. 22
Young students experiencing
technology thanks to Noel Leeming.
Fig. 23
Students getting digital advice through Noel Leeming’s
community learning programme.
2,500
We have partnered with 24 low-decile primary
schools, delivering 2,500 hours of free learning
sessions to teachers and their students.
53
52
NOEL LEEMING
WAREHOUSE STATIONERY
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT

At Torpedo7 we live and
breathe the outdoors; we think
it’s important that others have
the opportunity to experience
it as well. That is why we focus
our community efforts on
outdoor education initiatives.
Giving the Gift of the Outdoors
Our partnership with Hillary Outdoors Education Centres
allows our team members and generous customers to
share our outdoors way of life with students who wouldn’t
otherwise have the opportunity.
The partnership focuses on youth from low-decile
schools, giving them the chance to grow through a unique
adventure and outdoor experience. The experiences are
designed to challenge youth both mentally and physically,
helping them work together as a team and grow as
individuals. These are often life-changing, building the
skills and resilience youth need – with a positive flow-on
effect to their school, family and community life.
“I will apply what I have learned about perseverance
and patience into my school work, being patient and
persevering with long, tedious assignments and tasks,
knowing that I will enjoy the end result,” says Rebecca,
a student at Papatoetoe High School who took part in
a five-day outdoor education programme on Great Barrier
Island thanks to funding from Torpedo7.
Schools that have benefited from our partnership
include Melville High School, Papatoetoe High School,
Taupo-a-nui, and Auckland Girls’ Grammar School.
Over $8,500 was raised for Hillary Outdoors during FY17;
this will contribute positively to the life-journey of the
youth who participate in the outdoor learning experiences.
“ I believe the funding and
opportunity to attend this
programme has allowed each
individual student to explore
their own values and potential.
This will enable them as
individuals and members of
a community to contribute to
developing a stronger, vibrant
local community in the future.”
Keith Francis – Papatoetoe High School teacher
Fig. 24Fig. 23
Students participating
in the Hillary Outdoors
education programme.
The 1-day team continued their
partnership with Ronald McDonald
House Charities® (RMHC®) in
FY17. Ronald McDonald House®
provides free accommodation
and support services to thousands
of families, ensuring they are
better placed to cope and help
their children heal.
The RMHC® facilities seek to alleviate the emotional, practical
and financial burdens a family can face to enable them to
focus on the most important thing – their child’s recovery.
Through the team’s efforts and the generosity of our
customers, 1-day contributed $25,000 towards Christmas
toys and gifts for all families staying in a Ronald McDonald
House® during this financial year.
The 1-day team also volunteered at the Auckland House to
cook a festive Christmas feast – allowing families to have
a night off cooking so they could spend this special time
with loved ones. Santa added Christmas cheer with a visit
on the night, handing out 1-day presents to the children.
Over 1,000 gifts were donated nationwide to all Ronald
McDonald Houses for children and their families.
In addition to Christmas cheer, 1-day supply all
participating RMHC® Supper Clubs with 1-day products to
auction off at these great events. This year the donated
products raised $29,000 – thanks to a bunch of wonderful
volunteers organising these events. The 1-day staff also ran
an annual corporate golf day at Ngaruawahia Golf Course
in March, which raised $8,500 through auctions and
donations from local businesses and suppliers.
Fig. 26
1-day presents a
cheque to Ronald
McDonald House®.
Fig. 25
54
55
COMMUNITY & ENVIRONMENT
TORPEDO7
1-DAY
COMMUNITY & ENVIRONMENT

This year saw the continued
success of our The Warehouse
Group fundraising and
community programmes – all
designed to help New Zealand
flourish. The 25th annual Gala
Dinner was New Zealand’s largest
corporate fundraising dinner
and raised a record amount.
Our team members in stores,
our store support office and
distribution centres continued
to get in behind our fundraising
efforts, and they give generously
through payroll giving.
Fig. 27
Students learning
gardening skills with
Harold the Giraffe.
Fig. 28
In FY17, our team members
donated a total of $138,489
through payroll giving.
Fostering Team Member Generosity
We’re all about helping our team to be the best they can
be, which includes supporting communities and helping
New Zealand flourish. Team-member generosity continued
to grow over the past year, with payroll giving becoming
even more popular.
Payroll giving is a voluntary initiative that enables our
team members to give one-off or ongoing donations from
their pay to a registered charitable organisation or school
of their choice. Our team tell us they love the flexibility and
ease of payroll giving, which enables them to support their
neighbourhood and causes that matter to them.
In FY17, our team members donated a total of $138,489
through payroll giving, which has benefited more than
220 community organisations. This takes our all-time total
raised through payroll giving to over $500,000 since we
launched this initiative.
Helping to Tackle Childhood Obesity
New Zealand ranks third-highest in the OECD for child
obesity levels, with one in three Kiwi kids classed as being
obese or overweight – and rates are continuing to rise.
The knock-on effects of being obese or overweight for
a young person include low self-esteem, bullying, eating
disorders, ill health and even suicide.
To tackle this rising epidemic, Life Education Trust and
Garden to Table partnered to create the Empower
programme. This is a comprehensive and sustainable
classroom-based initiative, which will be the largest
programme to tackle childhood obesity in New Zealand.
Empower was funded through The Warehouse Group’s
Gala Dinner 2016, which raised a record amount of
$776,584 to launch the programme, thanks to our
generous suppliers and business partners.
The success of the initiative is down to collaboration – by
bringing together two of the Group’s community partners,
Empower will deliver even greater outcomes. It leverages
Life Education Trust’s experience and strength in delivering
classroom-based modules around food, nutrition and
healthy eating – and Garden to Table brings practical
learning in the garden and the kitchen.
Over a two-year period, Empower will benefit around
32,000 Kiwi children in about 170 schools – with a mission
to empower children with the knowledge to take action
and create healthy, lifelong habits.
“Gaining the support of The Warehouse Group and its
suppliers and business partners, who each year make a
significant contribution to community development, has
ensured our innovative programme can go forward.”
John O’Connell – CEO Life Education Trust
$
776k
Empower was funded through The Warehouse Group’s
Gala Dinner 2016, which raised a record amount of
$776,584 to launch the programme, thanks to our
generous suppliers and business partners.
57
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THE WAREHOUSE GROUP
THE WAREHOUSE GROUP
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT

Recognised for Helping New Zealand Flourish
Throughout the year, The Warehouse Group received
industry recognition for several of our community initiatives.
• We received our third Business and Community
Shares (BACS) Good Business Egg Award in five
years, which is more than any other New Zealand
business has achieved. Our BACS Award recognised
The Warehouse’s commitment to ‘Community
Empowerment in Aotearoa’ – focusing on education,
well-being and youth employment.
• We were the first business to be accredited by White
Ribbon, recognising our policies and work to prevent
family violence.
• Our ‘Family Violence, it’s not OK’ initiative won the
Corporate Social Responsibility award and was a
finalist in the Christian Dahmen Memorial Award for HR
Innovation at the 2017 Human Resources Institute of
New Zealand Awards.
• The Warehouse was first-equal with Rainbow’s End
for the Local Youth Employer Award at the 2016
Auckland ‘Young at Heart’ Awards – acknowledging the
contribution made to creating sustainable employment
opportunities for young people.
Just after year-end we were awarded the Emerging
Diversity and Inclusion Award by Diversity Works for our
family violence initiatives.
A Round of Golf for Good
Over $75,000 was raised for Grandparents Raising
Grandchildren at the Bob Tindall Golf Day in March 2017,
thanks to the generosity of our suppliers.
The funds raised from the event extends caregiver education
programmes throughout New Zealand, providing vital
support services to more than 6,000 full-time grandparent
and whānau caregivers who are raising children in
circumstances where the alternative is foster care.
We are proud to support Grandparents Raising
Grandchildren, ensuring grandparents are well equipped
to deliver the very best outcomes and care for some of
New Zealand’s most vulnerable children.
“I admire grandparents who take on such a huge
responsibility and it is great they have a range of support
services through an organisation like Grandparents
Raising Grandchildren.”
Nick Grayston – CEO, The Warehouse Group
Standing Against Family Violence
In New Zealand, police are called to a family-violence-
related incident every 5.5 minutes and one in three
women will experience domestic violence at some point
in their lifetime. These are just some of the statistics we
are working to change through our ‘Family Violence, it’s
not OK’ initiatives. This multilayered initiative not only
supports our team members but also they have been
recognised by other businesses and industry groups as
leading in their field, which has potential to broaden the
benefits further.
Launched in FY16, the programme was strengthened
in FY17 to include comprehensive training, including
educating people leaders on signs and ways to discuss
the subject with someone who may need support
within their team. During the FY17 year we were the
first business in the country to publish Women’s Refuge
information resources on our team-member intranet. The
information includes advice on the warning signs of family
violence, how to stay safe, how to seek help and how to
help others. It also features a section on how to support
team members, including details of our ‘Family Violence,
it’s not OK’ policy. Another initiative put in place during
the year was an in-store poster campaign to support team
members who may be experiencing family violence.
In addition, we were proud to host two knowledge-sharing
events for other New Zealand businesses which wanted
to know more about our policy and associated training.
The policy and training resources were shared in an
effort to encourage more businesses to implement
similar initiatives.
Fig. 29
The Warehouse being
presented with their
accreditation by White Ribbon.
Group Fundraising
August 2016 to July 2017
The Warehouse Group’s
Gala Dinner (proceeds to
Life Education Trust and
Garden to Table’s Empower
programme)
Bob Tindall Golf Day
(proceeds to Grandparents
Raising Grandchildren)
Payroll giving
Support office, distribution
centre and Shanghai office
fundraising
$
1,025,842
Fig. 30
Total Group fundraising.
$
776,584
$
76,000
$
138,489
$
34,769
58
59
THE WAREHOUSE GROUP
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT
THE WAREHOUSE GROUP

3.9
%
This year is the third year
of reporting greenhouse
gas (GHG) emissions generated
by all the major Group
businesses: The Warehouse,
Warehouse Stationery,
Noel Leeming, Torpedo7,
and Financial Services.
We have achieved Certified Emissions Measurement and Reduction
Scheme (CEMARS®) certification for these emissions, which recognises
our commitment to managing and reducing our GHG emissions. To receive
this certification our GHG emissions and emissions reduction plan were
independently reviewed and audited.
The Group’s top emissions activities were international shipping (36% of
emissions), electricity (29%) and domestic shipping (15%), which includes road,
rail and sea shipping and courier freight. International shipping emissions are
reported for the products we directly source from overseas; we do not include
international shipping emissions for products sourced within New Zealand,
which our suppliers are responsible for.
Overall, Group emissions fell by 3.9% to 39,515 tonnes of carbon dioxide
equivalent (CO
2
e).
Overall, Group emissions fell by
3.9% to 39,515 tonnes of carbon
dioxide equivalent (CO
2
e).
However, there were emissions increases in three key
areas: international shipping, courier freight, and landfill.
International shipping increases were due to greater
use of air transportation. Courier freight, particularly air
freighting of parcels within New Zealand, has increased
as we seek to deliver orders to customers more quickly.
We have started using an electric van for some deliveries,
to reduce emissions where possible. Landfill increases
are primarily as a result of construction-related waste
from opening new stores and extending our distribution
centres, as well as from disposing of damaged products
and fittings because of the Kaikoura earthquake.
Warehouse Stationery’s emissions fell by 9.7%, largely
from decreases in air travel and electricity emissions.
Noel Leeming’s emissions decreased by 9%, also
predominantly from decreases in air travel and electricity
emissions, although there was an increase in fuel used in
company vehicles.
Torpedo7’s emissions grew by 16% with significant
increases in the areas of international shipping and landfill.
There were two main drivers of this reduction: air travel
and electricity. Air travel has been reduced with new
booking controls being put in place. Electricity usage
decreased by 2%; in addition, the emissions impact of
electricity fell significantly during FY17 as very high levels
of renewable electricity were generated, according to the
Ministry of Business, Innovation and Employment. The net
impact was a reduction in electricity emissions of 17%.
Driving the decreases in electricity usage have been
the installation of LED lighting in stores (now in 10 of
The Warehouse stores), a store closure, and – for
unfortunate reasons – the partial closure of the Lower
Hutt store because of damage from the Kaikoura
earthquake. We anticipate long-term electricity use
to grow because we have committed to 30% of our own
road fleet to be electric by the end of 2019. Our overall
emissions will be lower, though, as we substitute fossil
fuels with electricity.
The Warehouse generates 78% of the Group’s emissions,
reflecting its greater store footprint and sales within
the Group. Also, The Warehouse directly sources the
greatest proportion of products from overseas, and so has
significantly more international shipping emissions. The
Warehouse’s emissions fell by 3.9%, largely driven by – as
discussed above – air travel and electricity use, and from
a reduction in gases lost from air-conditioning systems
because of better air-conditioning maintenance and the
use of newer units.
61
60
GHG EMISSIONS
COMMUNITY & ENVIRONMENT
GHG EMISSIONS
COMMUNITY & ENVIRONMENT

Palm oil
In FY16, we introduced our Palm Oil Sourcing Policy which
covers any product that contains palm oil (or a palm oil
derivative). Palm oil is an ingredient in a wide range of
product categories, most common in food, pet food,
household cleaning products, personal care, and health
and beauty. Like our wood policy, this policy commits
us to ensure that any palm oil ingredients come from
certified sustainable sources. Progress has been slower
than expected because of challenges in identifying palm
oil in products and sourcing genuine certified palm oil.
To accelerate progress, we are focusing on health and
beauty and food categories, as palm oil is most prevalent
in these product areas.
Microplastics
In the early part of FY17 we introduced a ban on wash-off
health and beauty, personal care, and cleaning products
containing microplastics. Microplastics are minuscule
balls of plastic, often called microbeads, which are used
in products for functions such as abrasion (exfoliation),
bulking or controlling viscosity. The plastics are washed
down the drain after use and sewer systems cannot
capture them, so they end up in the ocean as a pollutant
and are often eaten by sea creatures. From May 2018,
the Government will ban the sale of wash-off products
containing microplastics.
Apparel
We have recently started a project to assess and address
the environmental impact of our apparel products. We are
focusing on our top-selling products and evaluating them
against industry benchmarks in areas such as material
types and chemicals used in production processes. Once
we have assessed these risks we will investigate solutions
with suppliers.
Customer Electric Vehicle Charging
The Energy Efficiency Conservation Authority (EECA)
awarded The Warehouse part funding for public electric
vehicle (EV) charging stations outside 20 of The Warehouse’s
stores. We have focused on stores outside of Auckland
because there are fewer public charging stations there.
Our first of these chargers will be installed in Southland by
the end of 2017. The map on page 63 shows the 20 stores
that will have chargers by July 2018.
In addition to these 20, we have installed a public charger
at The Warehouse Royal Oak (Auckland), where we have
been testing how best to install and operate the charger.
In addition, we have installed four chargers at our Store
Support Office for use by employees and visitors.
Environmentally Sustainable Sourcing
Wood
We want to help our customers live more sustainably by
giving them peace of mind that the products they buy are
sourced in environmentally sustainable ways. In FY15 our
Wood Product Sourcing Policy was put in place to ensure
that products containing wood or wood pulp were not
linked to deforestation. We have made significant progress,
with most impacted products now sourced sustainably.
Fig. 32
Energy-efficient LED
lighting at The Warehouse,
Queenstown.
Fig. 31
Our charging station network
to be installed outside
20 of The Warehouse’s stores.
Fig. 33
The Wellington launch
of soft plastics recycling
at The Warehouse, Lyall Bay.
63
62
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT

Fig. 34
Polystyrene compactor at our North Island Distribution Centre.
Statistics
The
Warehouse
Warehouse
Stationery
Noel
LeemingTorpedo7Total
Landfill
kg total
2017
2,443,836 243,043 474,793 167,477 3,329,149
2016
2,321,209 269,013 420,437 110,814 3,121,474
2015
2,383,683 322,096 381,225 138,515 3,225,518
2014
2,481,645 587,679 338,660 N/A 3,407,984
AVERAGE
kg per
$m sales
2017
1,387 8745861,062977
2016
1,318964559745897
2015
1,387 1,226 573 1,056 1,060
2014
1,490 2,345 546 N/A 1,460
Store electricity
kWh total
2017
65,691,866 8,935,37513,041,9982,194,52389,863,762
2016
67,416,5248,723,44613,239,3351,865,900 91,245,205
2015
67,949,9427,865,95713,312,4211,744,219 90,872,538
2014
67,168,4168,545,69015,479,178N/A 91,193,284
AVERAGE
kWh per
m
2
per
month
2017
10.6410.5313.8711.4811.63
2016
11.28 10.93 14.35 10.41 11.74
2015
11.31 9.94 16.38 9.74 11.84
2014
11.18 10.44 19.32 N/A 13.65
GHG
CO
2
e total
2017
31,0302,5123,8142,15939,515
2016
32,222 2,783 4,193 1,862 41,060
2015
31,1162,7524,0761,970 39,914
2014
29,8192,9724,339N/A 37,130
AVERAGE
CO
2
e
per $m
2017
17.62 9.034.7013.6911.26
2016
18.30 9.975.5812.5211.60
2015
18.11 10.47 6.12 15.01 12.43
2014
17. 91 11.86 6.99 N/A 12.25
Plastic bags ordered – The Warehouse
% YOY CHANGE% CHANGE ON 2008
Total
2017
14,132,000-0.3%-67%
2016
14,178,000 –3.7%–67.3%
2015*
14,726,000 25.6%–66.0%
2014
11,722,000 –73.0%
2008†
43,370,500
Total
per $m
2017
8,023-0.4-7 1 .7%
2016
8,052 –6.0%–7 1 .6%
2015*
8,570 21.7%–69.8%
2014
7,039
2008†
28,347
† In 2008 we did not charge for plastic bags.
* 2015 restarted upwards from 14,202,000 due to an error in data originally provided.
Fig. 35
The Warehouse, Lyall Bay team supporting
The Great Community Clean Up.
One potential challenge to this target is the impact of
new regulations in China that restrict importing some
recyclables. This will potentially affect our level of
recycling of plastic film, or pallet wrap. We are working
with our recyclers to understand the impact and
alternatives available.
A recycling difficulty we have had for some time has been
the recycling of polystyrene, as there are few recyclers
with the necessary equipment. As part of our North
Island Distribution Centre expansion, we have included
on-site polystyrene recycling equipment that compacts
this material by over 90%. We then sell this compacted
polystyrene onto one our recycling partners.
The Great Community Clean Up
Late September 2016 saw the inaugural The Warehouse
Great Community Clean Up. The event, in partnership
with Neighbourly, encourages our team members and
the New Zealand public to volunteer their time to clean
up their local neighbourhood. We repeated the clean-up
again in late April 2017, and plan to repeat it annually each
April. Across the two clean-ups in FY17, more than 1,800
people volunteered (including 1,100 team members) across
165 groups, cleaning-up more than 180 communities
across the country.
Plastic Bags and Recycling
In FY17, The Warehouse stores ordered 14.1 million plastic
checkout bags, 46,000 (or 0.3%) fewer than last year.
Customers can now recycle their plastic bags, together
with other soft plastics, at more of The Warehouse’s
stores. The Warehouse is a participant in a voluntary,
industry-led initiative that enables customers to recycle
these plastics in special recycling bins at The Warehouse
stores and grocery retailers. The recycling campaign
launched in October 2015 is now available in 47 of The
Warehouse’s stores across the country, with several more
planned for FY18. To July 2017, the scheme had collected
more than 21 tonnes from our customers, which equates
to approximately 5.5 million pieces of plastic.
Waste and Recycling
Our waste performance has been mixed in FY17,
increasing 7% in weight. This was largely been generated
by construction-related waste from opening new stores
and extending our distribution centres. In addition, we had
to dispose of damaged products and fittings as a result
of the Kaikoura earthquake. These events aside, there is
still significant scope to improve recycling at many of our
sites. To give greater visibility of recycling performance,
we have begun reporting landfill diversion for The
Warehouse, with other brands to follow soon. Landfill
diversion represents the proportion of total waste that
is diverted to recycling. In FY17, The Warehouse stores
diverted approximately 82% of its waste to recycling,
leaving 18% going to landfill. We have set a target of
95% diversion by 2020.
Fig. 36
GHG Emissions Breakdown
Tonnes of carbon dioxide equivalent (CO
2
e)
The Warehouse
Warehouse
Stationery
Noel
Leeming
Torpedo7
Financial
Services
Total
FY17FY16
%
CHANGEFY17FY16
%
CHANGEFY17FY16
%
CHANGEFY17FY16
%
CHANGEFY17FY16
%
CHANGEFY17FY16
%
CHANGE
Int’l shipping13,13412,0489%592643–8%–––59241123%–––14,23113,1029%
Electricity8,58810,571–19% 1,0671,227–13% 1,5761,862–15% 2622620%2836–22%11,52213,958–17%
Domestic shipping4,5352,4557%36431316%1109910%1,07994314%–––6,0875,58032%
Employee
air travel
1,9482,251–13%279378–26%503794–37%21117819%13–
–
2,9543,601–18%
Landfill
1,5121,22424%146160–9%32726125%784667%–––2,0621,69122%
Company–owned
vehicles and lifts
96688110%292040%1,2571,14410%814–44%117–51%2,2712,06610%
GHG losses from
air–conditioning
systems
160865–81%201811%287331%––––––209890–77%
Employee private
km claims
130159–18%1623–31%1326–51%176159%3317%178217–18%
Total emissions30,97432,222–3.9%2,5122,783–9.7%3,8144,193–9.0%2,1591,86216.0%554620.9%39,51541,105–3.9%
Total emissions
per $m sales
17.6218.30–3.7%9.039.97–9.4%4.705.58–15.6%13.6912.52+9.4%–––11.2611.60–2.8%
65
64
GHG EMISSIONS BREAKDOWN
STATISTICS
COMMUNITY & ENVIRONMENT
COMMUNITY & ENVIRONMENT

Our Five Strategic
Key Results Areas
Leadership
Wellness
Integration and Simplification
Risk and Compliance
Partner with Businesses
and Customers
Ensure leaders know how to lead to keep our people safe and well
Create an environment where workplace wellness takes priority
Health and Safety systems and processes using data for targeted injury
and wellness initiatives
Manage our risks and compliance obligations
Partner with like-minded businesses and our customers to drive step change
in understanding of safety practices in New Zealand
01
02
03
04
05
67
66
FIVE STRATEGIC KEY RESULTS AREAS
HEALTH & SAFETY
HEALTH & SAFETY

The Group remains committed to
providing a safe environment for
our team, customers, contractors
and visitors. While solid progress
has been made in the areas
of prevention and reporting,
we were devastated by a recent
fatality involving an employee
of a contractor delivering goods
to our premises.
Reporting was enhanced internally as well, with a view
to driving our proactive and preventative health and
safety culture through the incorporation of a new suite
of metrics. These metrics are expected to enhance
clarity and consistency of reporting at all levels of the
organisation, including the Board.
We also placed greater emphasis on the management
of the Group’s 10 most critical risks. Each risk has been
assigned to an Executive Team member to drive activity
and projects, to better understand and mitigate such risks.
A disturbing societal issue we have seen during the
year is an increase in violent activities throughout our
network. We have implemented a comprehensive training
programme to enable our teams to manage these
situations, in addition to increasing our security measures.
We retained our ACC Partnership Programme Tertiary
status for another year, following a successful audit.
In addition to health and safety, we are placing increased
emphasis on the wellness of our teams and, during the
financial year, we implemented several health-related
programmes aimed at improving the lives of our team
members. One of these initiatives is a commitment that
all our sites will be smokefree from January 2018, and
we are introducing measures to support our teams during
this transition.
Much of the focus for FY17 was on embedding a culture
of health and safety awareness and prevention. Significant
inroads were made through the introduction of a new Health
and Safety Management tool and more robust reporting.
Unfortunately, the year was marred by the Group’s first-
ever fatal accident, involving an employee of a contractor
at our Torpedo7 Fulfilment Centre in Hamilton. We were
also disappointed by the lack of a reduction in injury
numbers, particularly in the Red stores. We do, however,
believe this will change through focused endorsement by
leadership, new technology and data-driven initiatives.
A key success for the year was the launch of SafetyHub,
a Group-wide common Health and Safety Management
tool accessible to all team members digitally and on
mobile. SafetyHub has significantly enhanced our ability
to report and capture data on incidents, near misses,
hazards and preventative needs. It has improved access
to information for our teams and, most importantly, made
reporting incidents considerably easier.
Amongst SafetyHub’s features is ‘Spot It, Fix It’, a
mechanism to enable team members to report potential
hazards that they have identified and to either do
something about them immediately or log them for
attention. Over 1600 potential hazards have been loaded
within the first four months of Spot It, Fix It’s launch.
In addition to the preventative reporting, we have
pleasingly also seen a reporting increase in near misses.
SafetyHub’s ease of reporting and its rich data is expected
to go a long way to helping us better understand the root
cause of incidents and being able to prevent them.
Fig. 01
Health & Safety.
69
68
HEALTH & SAFETY
COMMITTED TO PROVIDING A SAFE ENVIRONMENT
HEALTH & SAFETY
INTRODUCTION

Financial Statements
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
The financial statements have been presented in a style which attempts to make them less complex and more relevant
to shareholders. The note disclosures have been grouped into six sections: ‘basis of preparation’, ‘financial performance’,
‘operating assets and liabilities’, ‘financing and capital structure’, ‘financial risk management’ and ‘other disclosures’.
Each section sets out the significant accounting policies in grey text boxes applied in producing the relevant notes, along
with details of any key judgements and estimates used. The purpose of this format is to provide readers with a clearer
understanding of what drives financial performance of the Group.
CONTENTS
FINANCIAL STATEMENTS PAGE
Consolidated income statement 72
Consolidated statement of comprehensive income 72
Consolidated balance sheets 73
Consolidated statement of cash flows 74
Consolidated statement of changes in equity 75
NOTES TO AND FORMING PART OF THE
FINANCIAL STATEMENTS
BASIS OF PREPARATION
1.1 Reporting entity 76
1.2 Compliance statement 76
1.3 Basis of preparation 76
1.4 Reporting period 76
1.5 Critical accounting judgements, estimates
and assumptions 76
1.6 Restatement of prior year 76
FINANCIAL PERFORMANCE
2.0 Segment information 77
2.1 Operating performance 77
2.2 Capital expenditure, depreciation and amortisation 77
2.3 Balance sheet information 77
3.0 Income and expenses 78
3.1 Other income 78
3.2 Lease and occupancy expense 78
3.3 Employee expense 78
3.4 Other operating expenses 78
3.5 Auditor’s fee 78
4.0 Taxation 79
4.1 Taxation – Income statement 79
4.2 Taxation – Balance sheet current taxation 79
4.3 Taxation – Balance sheet deferred taxation 79
5.0 Adjusted net profit 80
6.0 Earnings per share 80
7.0 Dividends 81
7.1 Dividends paid 81
7.2 Dividends policy reconciliation 81
7.3 Imputation credit account 81
OPERATING ASSETS AND LIABILITIES PAGE
8.0 Working capital 82
8.1 Inventory 82
8.2 Trade and other receivables 82
8.3 Trade and other payables 82
8.4 Provisions 83
9.0 Non-current assets 83
9.1 Property, plant and equipment 83
9.2 Intangible assets 84
FINANCING AND CAPITAL STRUCTURE
10.0 Borrowings 85
10.1 Net debt 85
10.2 Net interest expense 85
10.3 Bank facilities 85
11.0 Equity 86
11.1 Capital management 86
11.2 Contributed equity 86
11.3 Reserves 87
11.4 Minority interest 87
FINANCIAL RISK MANAGEMENT
12.1 Financial risk factors 88
12.2 Derivative financial instruments 88
12.3 Liquidity risk 89
12.4 Credit risk 89
12.5 Market risks 90
OTHER DISCLOSURES
13.0 Key management personnel 91
14.0 Executive Long term incentive plan 91
15.0 Discontinued operations 92
15.1 Financial Services Group results and cash flows 92
15.2 Financial Services Group impairment of assets 92
15.3 Financial Services Group subsequent events 92
16.0 Held for sale 93
17.0 Commitments 93
18.0 Contingent liabilities 93
19.0 Related parties 93
20.0 Prior year restatement 94
21.0 New Accounting Standards which are relevant
to the Group but are not yet effective 94
The Warehouse Group Limited is a limited liability company incorporated and domiciled in New Zealand.
The address of its registered office is Level 4, 4 Graham Street, PO Box 2219, Auckland.
These financial statements have been approved for issue by the Board of Directors on 21 September 2017.
Joan Withers Keith Smith
Chairman Deputy Chairman
For the 52 week period
ended 30 July 2017
71
FINANCIAL STATEMENTS
70
FINANCIAL STATEMENTS

Consolidated Income Statement
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
(52 WEEKS) (52 WEEKS)
NOTE20172016
$000 $000
Continuing operations
Retail sales
2.1 2,980,771 2,924,682
Cost of retail goods sold8.1 (2,008,859)(1,966,510)
Gross profit971,912 958,172
Other income
3.1 8,144 8,858
Lease and occupancy expense3.2 (156,659)(148,404)
Employee expense3.3 (486,196)(475,788)
Depreciation and amortisation expense2.2 (58,376)(58,210)
Other operating expenses3.4 (170,988)(173,463)
Operating profit from continuing operations2.1 107,837 111,165
Unusual items5.0 (605)16,158
Equity earnings of associate–723
Earnings before interest and tax from continuing operations107,232 128,046
Net interest expense10.2 (12,527)(14,154)
Profit before tax from continuing operations94,705 113,892
Income tax expense4.1 (23,691)(25,890)
Net profit for the period from continuing operations71,014 88,002
Discontinued operations
Loss from discontinued operations (net of tax)
15.1 (50,283)(5,526)
Net profit for the period20,731 82,476
Attributable to:
Shareholders of the parent
20,429 78,338
Minority interests11.4 302 4,138
20,731 82,476
Profit attributable to shareholders of the parent relates to:
Profit from continuing operations
70,712 83,864
Loss from discontinued operations(50,283)(5,526)
20,429 78,338
Earnings per share attributable to shareholders of the parent
Basic earnings per share
6.0 5.9 cents 22.7 cents
Diluted earnings per share6.0 5.9 cents 22.6 cents
Earnings per share attributable to shareholders of the parent from continuing operations
Basic earnings per share
6.0 20.5 cents 24.3 cents
Diluted earnings per share6.0 20.4 cents 24.2 cents
Consolidated Statement of Comprehensive Income
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
(52 WEEKS) (52 WEEKS)
NOTE2017 2016
$000 $000
Net profit for the period20,731 82,476
Items that may be reclassified subsequently to the Income Statement
Movement in derivative cash flow hedges
9,484 (64,480)
Movement in de-designated derivative hedges606 605
Tax relating to movement in hedge reserve(2,825)17,885
Other comprehensive income7,265 (45,990)
Total comprehensive income27,996 36,486
Attributable to:
Shareholders of the parent
27,694 32,348
Minority interest11.4 302 4,138
Total comprehensive income27,996 36,486
Attributable to:
Total comprehensive income from continuing operations
78,279 42,012
Total comprehensive loss from discontinued operations(50,283)(5,526)
Total comprehensive income27,996 36,486
Total comprehensive income from continuing operations attributable to:
Shareholders of the parent
77,977 37, 8 74
Minority interest11.4 302 4,138
Total comprehensive income78,279 42,012
The above consolidated income statement and statement of comprehensive income should be read in conjunction with the accompanying notes.The above consolidated balance sheets should be read in conjunction with the accompanying notes.
Consolidated Balance Sheets
AS AT 30 JULY 2017
CONSOLIDATEDCONTINUING RETAIL GROUP
DISCONTINUED
FINANCIAL SERVICES GROUP
NOTE201720162017201620172016
$000 $000 $000 $000 $000 $000
ASSETS
Current assets
Cash and cash equivalents
10.1 47,492 49,881 40,179 36,531 7,313 13,350
Finance business receivables– 73,565 – – – 73,565
Trade and other receivables8.2 71,088 77,059 71,088 72,434 – 4,625
Inventories8.1 491,818 501,713 491,818 501,713 – –
Derivative financial instruments12.2 – 621 – 621 – –
Taxation receivable4.2 4,959 – – – 5,972 3,352
615,357 702,839 603,085 611,299 13,285 94,892
Assets held for sale16, 9.1 77,142 52,277 – 52,277 77,142 –
Total current assets692,499 755,116 603,085 663,576 90,427 94,892
Non-current assets
Property, plant and equipment
9.1 252,175 271,043 252,175 269,791 – 1,252
Intangible assets9.2 127,726 170,668 127,726 124,492 – 46,176
Investment in discontinued finance business– – 28,186 76,797 – –
Derivative financial instruments12.2 541 738 541 738 – –
Deferred taxation4.3 40,911 43,011 40,992 40,718 – 2,293
Total non-current assets421,353 485,460 449,620 512,536 – 49,721
Total assets2.3 1,113,852 1,240,576 1,052,705 1,176,112 90,427 144,613
LIABILITIES
Current liabilities
Borrowings
10.1 49,593 125,202 49,593 125,202 – –
Trade and other payables8.3 267,304 271,308 267,304 264,424 – 6,884
Derivative financial instruments12.2 17,299 25,133 17,299 25,133 – –
Taxation payable4.2 – 2,068 1,013 5,420 – –
Provisions8.4 49,769 58,915 49,769 58,108 – 807
383,965 482,626 384,978 478,287 – 7,691
Securitised borrowings associated with assets held for sale10.1 56,717 – – – 56,717 –
Other liabilities directly associated with assets held for sale16 5,443 – – – 5,443 –
Total current liabilities446,125 482,626 384,978 478,287 62,160 7,691
Non–current liabilities
Borrowings
10.1 159,453 164,534 159,453 164,534 – –
Securitised borrowings10.1 – 60,125 – – – 60,125
Derivative financial instruments12.2 2,507 4,845 2,507 4,845 – –
Provisions8.4 19,378 17,850 19,378 17,850 – –
Deferred taxation4.3 – – – 81 –
Total non–current liabilities181,338 247,354 181,338 187,229 81 60,125
Total liabilities2.3 627,463 729,980 566,316 665,516 62,241 67,816
Net assets486,389 510,596 486,389 510,596 28,186 76,797
EQUITY
Contributed equity
11.2 358,046 357,685 358,046 357,685 – –
Reserves11.3 (13,036)(18,816)(13,036)(18,816)– –
Retained earnings140,512 171,560 140,512 171,560 – –
Investment in finance business– – – – 28,186 76,797
Total equity attributable to shareholders485,522 510,429 485,522 510,429 28,186 76,797
Minority interest11.4 867 167 867 167 – –
Total equity486,389 510,596 486,389 510,596 28,186 76,797
72
FINANCIAL STATEMENTS
73
FINANCIAL STATEMENTS

Consolidated Statement of Cash Flows
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
(52 WEEKS) (52 WEEKS)
NOTE20172016
Cash flows from operating activities
$000 $000
Cash received from customers2,996,090 2,944,555
Payments to suppliers and employees(2,841,679)(2,745,746)
Income tax paid(27,454)(28,037)
Interest paid(16,008)(16,495)
110,949 154,277
Loans repaid by finance business customers171,188 148,306
New loans to finance business customers(154,049)(140,123)
Net cash flows from operating activities128,088 162,460
Cash flows from investing activities
Proceeds from sale of property, plant and equipment and computer software
79,714 39,488
Proceeds from business disposal– 6,382
Minority interest capital contribution750 –
Dividend received from associate – 2,695
Purchase of property, plant and equipment and computer software(70,575)(75,180)
Contingent and deferred acquisition consideration(1,000)(1,575)
Acquisition of minority interest11.4 – (9,800)
Acquisition of subsidiaries, net of cash acquired– (4,363)
Other items(327)3
Net cash flows from investing activities8,562 (42,350)
Cash flows from financing activities
Repayment of retail borrowings
(79,821)(41,825)
Repayment of securitised borrowings(3,408)1,496
Repayment of finance leases(1,196)(1,402)
Purchase of treasury stock11.2 (2,148)(2,531)
Treasury stock dividends received 290 280
Dividends paid to parent shareholders(52,404)(55,920)
Dividends paid to minority shareholders(352)(2,522)
Net cash flows from financing activities(139,039)(102,424)
Net cash flow(2,389)17,686
Opening cash position49,881 32,195
Closing cash position10.1 47,492 49,881
Reconciliation of Operating Cash Flows
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
(52 WEEKS) (52 WEEKS)
NOTE20172016
$000 $000
Net profit
20,731 82,476
Non-cash items
Depreciation and amortisation expense
2.2 60,191 59,660
Intangible asset impairment9.2 40,061 –
Share based payment expense3.3 1,283 3,208
Interest capitalisation524 621
Movement in deferred tax4.3 (555)(7,977)
Movement in de-designated derivative hedges436 436
Share of profit from associate – (723)
Total non-cash items101,940 55,225
Items classified as investing or financing activities
Gain on sale of property, plant and equipment
(9,979)(4,392)
Gain on business disposal– (9,950)
Direct costs relating to business acquisitions and disposals946 479
Contingent consideration– (675)
Supplementary dividend tax credit4.2 378 425
Total investing and financing adjustments(8,655)(14,113)
Changes in assets and liabilities
Trade and other receivables
4,248 (3,681)
Finance business receivables6,210 (2,327)
Inventories9,895 7,851
Trade and other payables7,557 18,054
Provisions(6,811)15,471
Income tax(7,027)3,504
Total changes in assets and liabilities14,072 38,872
Net cash flows from operating activities128,088162,460
Consolidated Statement of Changes in Equity
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
NOTE
SHARE
CAPITAL
TREASURY
STOCK

HEDGE
RESERVES
EMPLOYEE
SHARE
BENEFITS
RESERVE
RETAINED
EARNINGS
MINORITY
INTEREST
TOTAL
EQUITY
$000$000 $000 $000 $000 $000 $000
For the 52 week period ended 30 July 2017
Balance at the beginning of the period
365,517 (7,832)(22,439)3,623 171,560 167 510,596
Net profit for the period– – – – 20,429 302 20,731
Movement in derivative cash flow hedges– – 9,484 – – – 9,484
Movement in de–designated derivative hedges– – 606 – – – 606
Tax relating to movement in hedge reserve4.2, 4.3– – (2,825)– – – (2,825)
Total comprehensive income– – 7,265 – 20,429 302 27,996
Contributions by and distributions to owners
Share rights charged to the income statement
– – – 1,283 – – 1,283
Minority interest capital contribution– – – – – 750 750
Share rights vested– 2,509 – (2,768)259 – –
Dividends paid7.1, 11.4– – – – (52,026)(352)(52,378)
Treasury stock dividends received– – – – 290 – 290
Purchase of treasury stock– (2,148)– – – – (2,148)
Balance at the end of the period365,517 (7,471)(15,174)2,138 140,512 867 486,389
(note: 11.2) (note: 11.2) (note: 11.3) (note: 11.3) (note: 11.4)
For the 52 week period ended 31 July 2016
Balance at the beginning of the period
365,517 (7,302)23,551 2,937 155,357 1,910 541,970
Profit for the period– – – – 78,338 4,138 82,476
Movement in derivative cash flow hedges– – (64,480)– – (64,480)
Movement in de–designated derivative hedges– – 605 – – 605
Tax relating to movement in hedge reserve4.2, 4.3– – 17,885 – – – 17,885
Total comprehensive income– – (45,990)– 78,338 4,138 36,486
Contributions by and distributions to owners
Share rights charged to the income statement
– – – 3,208 – – 3,208
Share rights vested– 2,001 – (2,522)521 – –
Dividends paid7.1, 11.4– – – – (55,495)(3,522)(59,017)
Treasury stock dividends received– – – – 280 – 280
Purchase of treasury stock– (2,531)– – – – (2,531)
Purchase of minority interest11.4– – – – (7,441)(2,359)(9,800)
Balance at the end of the period365,517 (7,832)(22,439)3,623 171,560 167 510,596
(note: 11.2) (note: 11.2) (note: 11.3) (note: 11.3) (note: 11.4)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
74
FINANCIAL STATEMENTS
75
FINANCIAL STATEMENTS

Notes to and forming part of the Financial Statements
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
1.0 BASIS OF PREPARATION
1.1 Reporting entity
The Warehouse Group Limited (the Company) and its subsidiaries (together the Group) trade in the New Zealand retail and financial services sectors.
The Company is a limited liability company incorporated and domiciled in New Zealand. The Group is registered under the Companies Act 1993 and
is an FMC Reporting Entity under Part 7 of the Financial Markets Conduct Act (FMCA) 2013. The address of its registered office is Level 4, 4 Graham
Street, PO Box 2219, Auckland. The Company is listed on the New Zealand Stock Exchange (NZX).
1.2 Compliance statement
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice (GAAP), FMCA 2013 and NZX listing rules.
They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS), other applicable Financial Reporting Standards,
and authoritative notes as appropriate for profit oriented entities. The financial statements also comply with International Financial Reporting Standards
(IFRS).
1.3 Basis of preparation
The measurement basis adopted in the preparation of these financial statements is historic cost, as modified by the revaluation of certain assets
and liabilities at fair value. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand, unless
otherwise stated.
The principal accounting policies applied in the preparation of these financial statements are set out in the accompanying notes where an accounting
choice is provided by NZ IFRS, is new or has changed, is specific to the Group’s operations or is significant or material. Where NZ IFRS does not provide
any accounting policy choice, the Group has applied the requirements of NZ IFRS but a detailed accounting policy has not been specifically included.
Since balance date the Group has sold most of the Financial Services Group and is actively seeking a buyer for the remaining part of this business
segment. The results for the Financial Services Group have been classified as a discontinued operation and are presented as a single amount in the
Income Statement. The Group has presented separate balance sheets for the retail segment and discontinued finance segment as part of the primary
financial statements. This is a non GAAP financial disclosure; however, the Group has presented the information to provide clarity regarding the balance
sheet for the continuing business. The consolidated balance sheet is the sum of each of the balance sheet line items for the continuing retail group and
discontinued financial services group adjusted for intergroup elimination entries.
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. A list of material subsidiaries at year end
are listed below.
PERCENTAGE OWNERSHIP
NAME OF ENTITYPRINCIPAL ACTIVITYCHANGENOTE2017 2016
The Warehouse LimitedRetail100 100
Warehouse Stationery LimitedRetail100 100
Noel Leeming Group LimitedRetail100 100
Torpedo7 LimitedRetail100 100
RRS 2013 LimitedRetailAmalgamated with Torpedo7 LimitedN /A 100
Torpedo7 Fitness LimitedRetail100 100
Torpedo7 Supplements LimitedRetail100 100
TW Financial Services Operations LimitedFinancial ServicesClassified as discontinued operations15100 100
The Warehouse Financial Services LimitedFinancial ServicesClassified as discontinued operations15100 100
Diners Club (NZ) LimitedFinancial ServicesClassified as discontinued operations15100 100
TW Money LimitedFinancial ServicesClassified as discontinued operations15100 100
Eldamos Investments LimitedProperty100 100
The Warehouse Nominees LimitedInvestment100 100
TWP No.3 LimitedRetail/Wholesale100 100
1.4 Reporting period
These financial statements are for the 52 week period 1 August 2016 to 30 July 2017. The comparative period is for the 52 week period 3 August 2015
to 31 July 2016. The Group operates on a weekly trading and reporting cycle, which means most financial years represent a 52 week period. However,
a 53 week year will occur once every 5 to 6 years.
1.5 Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires the Group to make judgements, estimates and assumptions that effect the reported amounts of
assets and liabilities at balance date and the reported amounts of revenues and expenses during the year. Judgements and estimates which are material
to the financial statements are found in the following notes:
(a) Inventories (note 8.1)
(b) Derivative financial instruments (note 12.2)
(c) Intangible assets (note 9.2)
(d) Financial Services Group impairment of assets (note 15.2)
1.6 Restatement of prior year
Discontinued operations
The prior year comparative numbers in the Income statement have been restated to present the results of discontinued operations as a single amount.
The prior year comparative information also provided in notes 3 and 5 which reference to the Income Statement has similarly been restated to exclude
discontinued operations.
Brand intangible assets and deferred taxation
Guidance was released in November 2016 by the IFRS Interpretations Committee (IFRIC) clarifying its position regarding indefinite life intangible
assets and deferred taxation arising as part of a business acquisition. Because of this guidance the Group has been required to recognise a previously
unrecognised deferred tax liability on the Brand Assets acquired as part of the acquisitions of the Noel Leeming Group and Torpedo7 businesses during
the 2013 financial year. The impact of this change means the Group recognised a deferred tax liability of $6.586 million, an increase in goodwill of $5.463
million and a reduction in minority interests of $1.123 million at the date of acquisition. Further information regarding the impact of the restatement
during the periods since the acquisitions through to the prior year is detailed in note 20.
2.0 SEGMENT INFORMATION
2.1 Operating performance
REVENUEOPERATING PROFITRETAIL OPERATING MARGIN
NOTE2017 20162017201620172016
$000 $000 $000 $000
The Warehouse1,761,399 1,760,708 84,531 89,376 4.8 % 5.1 %
Warehouse Stationery 278,181 279,155 15,743 14,288 5.7 % 5.1 %
Noel Leeming 810,705 752,137 19,264 12,050 2.4 % 1.6 %
Torpedo7157,726 148,660 2,675 3,380 1.7 % 2.3 %
Other Group operations8,603 13,201 (14,376)(7,929)
Inter–segment eliminations(35,843)(29,179)– –
Retail Group2,980,771 2,924,682 107,837 111,165 3.6 % 3.8 %
Unusual items5.0 (605)16,158
Equity earnings of associate– 723
Earnings before interest and tax107,232 128,046
Net interest expense10.2
Profit before tax from continuing operations(12,527)(14,154)
94,705 113,892
Operating segments
The Group has four operating segments trading in the New Zealand retail sector. These segments form the basis of internal reporting used by
management and the Board of Directors to monitor and assess performance and assist with strategy decisions.
Each of the four retail segments represent a distinct retail chain, synonymous with its segment name. Customers can purchase product from the retail
chains either online or through the Group’s physical retail store network. The Group’s store network currently has 92 (2016: 92) The Warehouse stores,
69 (2016: 66) Warehouse Stationery stores, 77 (2016: 75) Noel Leeming stores and 12 (2016: 11) Torpedo7 stores. The Warehouse predominantly
sells general merchandise and apparel, Noel Leeming sells technology and appliance products, Torpedo7 sells sporting equipment and, as the name
indicates, Warehouse Stationery sells stationery.
Group support office functions, such as Information Systems, Finance, Brand Executives and People Support, are operated using a shared services
model which allocates the costs of these support office functions to individual brands calculated on an arm’s-length basis. The remaining support office
functions which relate to corporate and governance functions, a property company and the Group’s interest in a chocolate factory are not allocated and
form the main components of the “Other Group operations” segment.
2.2 Capital expenditure, depreciation and amortisation
CAPITAL EXPENDITURE
DEPRECIATION AND
AMORTISATION
NOTE2017201620172016
$000 $000 $000 $000
The Warehouse36,374 41,301 40,819 41,105
Warehouse Stationery 3,861 5,296 6,722 6,578
Noel Leeming 10,382 6,875 8,421 7,484
Torpedo7581 781 1,059 1,240
Other Group operations10,253 10,156 1,355 1,803
Continuing Retail Group61,451 64,409 58,376 58,210
Discontinued operations2,513 9,017 1,815 1,450
Total Group63,964 73,426 60,191 59,660
Comprising
Property, plant and equipment
9.1 51,833 56,360 52,626 53,135
Computer software9.2 12,131 17,066 7,565 6,525
Total Group63,964 73,426 60,191 59,660
2.3 Balance sheet information
TOTAL ASS E TSTOTAL LIABILITIES
NOTE2017 201620172016
$000 $000 $000 $000
The Warehouse461,772 481,322 182,389 183,502
Warehouse Stationery 72,176 78,021 32,746 33,084
Noel Leeming 160,287 154,374 108,008 103,548
Torpedo751,742 49,504 11,269 10,870
Other Group operations90,229 150,886 2,039 9,378
Continuing Retail Group836,206 914,107 336,451 340,382
Discontinued operations77,142 102,903 5,443 7,691
Operating assets/liabilities913,348 1,017,010 341,894 348,073
Unallocated assets/liabilities
Cash and borrowings
10.1 47,492 49,881 265,763 349,861
Derivative financial instruments12.2 541 1,359 19,806 29,978
Intangible goodwill and brands9.2 106,601 129,315 – –
Taxation assets/liabilities4.2, 4.3 45,870 43,011 – 2,068
Total Group1,113,852 1,240,576 627,463 729,980
Notes to the Financial Statements – Financial Performance
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
76
NOTES TO THE FINANCIAL STATEMENTS
77
NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements – Financial Performance
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
Notes to the Financial Statements – Financial Performance
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
3.0 INCOME AND EXPENSES
Retail sales
Retail sales are recognised at the point of sale when the customer receives the goods or delivery takes place. Retail revenue from the sale of goods
is recognised at the fair value of the consideration received or receivable, net of returns, discounts and excluding GST.
Lease expense
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over
the period of the lease.
Employee expense
The employee entitlements expense includes wages and salaries, performance based compensation and share based compensation paid or accruing
to team members. Details of how these entitlements are calculated are found in notes 8.4 and 14.0.
3.1 Other income2017 2016
$000 $000
Tenancy rents received5,032 5,621
Other3,112 3,237
Other income8,144 8,858
3.2 Lease and occupancy expense2017 2016
$000 $000
Operating lease costs124,150 115,535
Other occupancy costs32,509 32,869
Lease and occupancy expense156,659 148,404
3.3 Employee expense2017 2016
$000 $000
Wages and salaries469,342 448,743
Directors' fees798 754
Performance based compensation14,773 23,127
Equity settled share based payments expense1,283 3,164
Employee expense486,196 475,788
3.4 Other operating expenses2017 2016
$000 $000
Other operating expenses include
Provision for bad and doubtful debts
1,293 484
Loss on disposal of plant and equipment716 1,135
Donations634 747
Net foreign currency exchange loss105 117
3.5 Auditor’s fees2017 2016
$000 $000
Auditing the Group financial statements579 562
Reviewing the half year financial statements90 90
Other services43 274
Total fees paid to PricewaterhouseCoopers712 926
Audit Fees – Corporate Governance
Fees paid to PricewaterhouseCoopers for other services related to treasury policy advice, executive remuneration benchmarking advice and, in the
prior year, digital services advice. In accordance with the Group’s policies regarding audit governance and independence this work was approved by
the Group’s Audit Committee. The Group’s policy permits the audit firm to provide non-audit services that are considered to be not in conflict with the
preservation of the independence of the auditor, subject to Audit Committee approval.
4 .0 TA X ATI O N
A reconciliation between the tax expense recognised in the income statement and tax expense calculated per the statutory income tax rate is detailed below.
4.1 Taxation – Income statementNOTE2017 2016
$000 $000
Profit before tax from continuing operations94,705 113,892
Loss before tax from discontinued operations15.1 (53,894)(7,596)
Profit before tax from continuing operations40,811 106,296
Taxation calculated at 28%11,427 29,763
Adjusted for the tax effect of:
Intangible asset impairment
11,217 –
Capital gain on business disposals– (2,652)
Contingent consideration– (189)
Equity earnings of associate– (202)
Share based payments(343)339
Non deductible expenditure1,336 1,039
Depreciation adjustments on building disposals and prior year business acquisitions5.0 (2,963)(3,708)
Income tax over provided in prior year(594)(570)
Income tax expense20,080 23,820
Adjust for income tax expense attributable to losses from discontinued operations15.1 3,611 2,070
Income tax expense attributable to continuing operations23,691 25,890
Income tax expense comprises:
Current year income tax payable
4.2 20,635 31,797
Deferred taxation4.3 (555)(7,977)
Income tax expense20,080 23,820
Income taxation
The income tax expense for the period is the tax payable on the current year’s taxable income based on the income tax rate adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in
the financial statements.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or
liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences
between the carrying amount and tax bases of investments in subsidiaries and associates where the parent entity is able to control the timing of the
reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised in equity are similarly recognised in equity.
Goods and services tax (GST)
The income statement and statement of cash flows have been prepared so that all components are stated exclusive of GST. All items in the balance
sheet are stated net of GST with the exception of receivables and payables which include GST invoiced.
The following table details the movement in income tax receivable/(payable) during the current and prior year.
4.2 Taxation – Balance Sheet current taxationNOTE2017 2016
$000 $000
Opening balance(2,068)2,250
Current year income tax payable4.1 (20,635)(31,797)
Acquisition of subsidiary– (814)
Net taxation paid27,454 28,037
Transfer from cash flow hedge reserve(170)(169)
Supplementary dividend tax credit378 425
Closing balance4,959 (2,068)
The following table details the major deferred income tax liabilities and assets recognised by the Group and the movements during the current and prior year.
4.3 Taxation – Balance Sheet deferred
taxation
NOTE
BRAND
NAMESINVENTORY
PROPERTY,
PLANT,
SOFTWARE AND
EQUIPMENT
EMPLOYEE
PROVISIONSDERIVATIVESOTHERTOTAL
$000 $000 $000 $000 $000$000 $000
For the 52 week period ended 30 July 2017
Opening balance
(6,586)12,604 9,001 12,844 8,161 6,987 43,011
Charged/(credited) to the income statement4.1 – (74)(900)258 – 1,271 555
Net charged to other comprehensive income– – – – (2,655)– (2,655)
Closing balance(6,586)12,530 8,101 13,102 5,506 8,258 40,911
For the 52 week period ended 31 July 2016
Opening balance
(6,586)11,118 2,809 12,295 (9,893)6,606 16,349
Charged/(credited) to the income statement4.1– 1,486 6,192 549 – (250)7,977
Net charged to other comprehensive income– – – – 18,054 – 18,054
Acquisition of subsidiary– – – – – 631 631
Closing balance(6,586)12,604 9,001 12,844 8,161 6,987 43,011
78
NOTES TO THE FINANCIAL STATEMENTS
79
NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements – Financial Performance
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
Notes to the Financial Statements – Financial Performance
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
5.0 ADJUSTED NET PROFIT
Adjusted net profit reconciliationNOTE2017 2016
$000 $000
Adjusted net profit from continuing operations68,185 69,157
Add back: Unusual items
Gain on business disposals
– 9,950
Gain on property disposals11,455 5,533
Restructuring costs(12,060)–
Contingent consideration– 675
Unusual items before taxation(605)16,158
Income tax relating to unusual items169 (1,545)
Income tax expense related to depreciation adjustments on building disposals and prior year
business acquisitions
4.0 2,963 3,708
Unusual items after taxation2,527 18,321
Minority interest– (3,614)
Net profit from continuing operations attributable to shareholders of the parent70,712 83,864
Certain transactions can make the comparison of profits between years difficult. The Group uses adjusted net profit as a key indicator of
performance and considers it provides a better understanding of underlying business performance and the Group also uses it as the basis for
determining dividend payments. Adjusted net profit makes allowance for the after tax effect of unusual items which are not directly connected
with the Group’s normal trading activities. The Group defines unusual items as any profits from the disposal of properties or investments, goodwill
impairment, restructuring costs, direct costs and contingent consideration adjustments relating to the acquisition of subsidiaries.
Unusual Items
(a) The prior year gain on business disposals represents firstly a gain on the sale of the business assets of Pet.co.nz ($4.750 million), and secondly a
gain on the notional sale of the Group’s 49% interest in The Warehouse Financial Services Limited (TWFSL) in September 2015 ($5.200 million).
The notional gain and sale occurred when the Group’s acquired the 51% majority shareholding in TWFSL from its joint venture partner.
(b) Property disposals during the year related to 3 store (2016: 3) properties and surplus land sold for a combined consideration of $79.304 million
(2016: $37.426 million) and realising a pre-tax profit of $11.455 million (2016: $5.533 million).
(c) In January 2017 the Group announced plans to restructure its operating model which largely impacted teams in the Group’s support offices. The
objective of the restructure was to integrate operating structures and executive leadership across the segments and strengthen the Group’s shared
support functions. Redundancy costs represent over 50 percent of the expense. The remaining costs include contracted transition costs relating
to changes to the number of roles that qualify for the Group’s incentive schemes, transition costs and asset write-off costs incurred to integrate
systems and processes.
(d) Adjustments to the amount of contingent consideration payable or paid are treated as gains and losses in the income statement. The prior year
gain represents the lower than estimated final deferred payment relating to the Insight acquisition (acquired September 2012).
6.0 EARNINGS PER SHARE
Earnings per share calculationNOTE20172016
Net profit attributable to shareholders of the parent ($000)20,429 78,338
Net profit from continuing operations attributable to shareholders of the parent ($000)70,712 83,864
Adjusted net profit ($000)5.0 68,185 69,157
Basic
Weighted average number of ordinary shares (net of treasury stock) on issue (000s)
344,802 344,737
Basic earnings per share (cents)5.9 22.7
Basic earnings per share from continuing operations (cents)20.5 24.3
Adjusted basic earnings per share (cents)19.8 20.1
Diluted
Weighted average number of ordinary shares (net of treasury stock) on issue adjusted for
unvested share rights (000s)
346,355 347,086
Diluted earnings per share (cents)5.9 22.6
Diluted earnings per share from continuing operations (cents)20.4 24.2
Adjusted diluted earnings per share (cents)19.7 19.9
Earnings per share (EPS) is the amount of post tax profit attributable to each share. Basic EPS is calculated by dividing net profit attributable to
shareholders by the weighted average number of ordinary shares (net of treasury stock) outstanding during the year.
Diluted EPS adjusts for any commitments the Group has to issue shares in the future that would decrease the basic EPS. The Group has two types
of dilutive potential ordinary shares (performance share rights and award share rights - refer note 14.0). Diluted EPS is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume conversion of the share rights.
Adjusted basic EPS and adjusted diluted EPS are similarly calculated using adjusted net profit as the numerator.
7.0 D IVI D E N DS
7.1 Dividends paid2017201620172016
$000 $000
CENTS PER
SHARE
CENTS PER
SHARE
Prior year’s final dividend17,342 17,342 5.0 5.0
Interim dividend34,684 38,153 10.0 11.0
Total dividends paid52,026 55,495 15.0 16.0
Dividend policy
The Board declares two dividends annually in respect of the half year (interim dividend) and full year results (final dividend). The Group’s dividend
policy is to pay a dividend to shareholders of between 75% and 85% of the Retail Group’s adjusted net profit.
All dividends paid were fully imputed.
7.2 Dividends policy reconciliationNOTE2017 201620172016
$000 $000
CENTS PER
SHARE
CENTS PER
SHARE
Interim dividend34,684 38,153 10.0 11.0
Final dividend (declared after balance date)20,811 17,342 6.0 5.0
Total dividends paid and declared in respect of the current and prior financial years55,495 55,495 16.0 16.0
Group adjusted net profit5.0 68,185 69,157
Pay-out ratio (%) 81.4 % 80.2 %
On 21 September 2017 the Board declared a final fully imputed ordinary dividend of 6.0 cents per share to be paid on 7 December 2017 to all
shareholders on the Group’s share register at the close of business on 24 November 2017.
7.3 Imputation credit account2017 2016
$000 $000
Imputation credits at balance date available for future distribution120,296113,682
The above amounts represent the balance of the Group’s imputation credit account at balance date adjusted for imputation credits that will arise from
the payment of the amount of the provision for income taxation. Imputation is a mechanism that a company uses to pass on credits for tax it has
paid on its profits, to its shareholders when it pays dividends. These imputation credits offset the amount of taxation that the New Zealand resident
shareholders would otherwise be liable to pay on those dividends, so they do not have to pay ‘double tax’.
80
NOTES TO THE FINANCIAL STATEMENTS
81
NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements – Operating Assets and Liabilities
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
Notes to the Financial Statements – Operating Assets and Liabilities
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
8.0 WORKING CAPITAL
8.1 Inventory2017 2016
$000 $000
Finished goods457,455469,592
Inventory adjustments(22,547)(19,676)
Retail stock434,908449,916
Goods in transit from overseas56,91051,797
Inventory491,818501,713
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using a weighted average method and includes expenditure
incurred to purchase the inventory and transport it to its current location. Net realisable value is the estimated selling price of the inventory in the
ordinary course of business less costs necessary to make the sale. The cost of inventories consumed during the year are recognised as an expense
and included in cost of goods sold in the Income Statement.
Significant judgements and estimates
Assessing provisions for inventory obsolescence, net realisable value and shrinkage involves making estimates and judgements in relation to future
selling prices and expected shrinkage rates between the most recent store stock counts and balance date. Shrinkage is a reduction in inventory due to
shoplifting, employee theft, paperwork errors and supplier fraud. The Group considers a wide range of factors, including historical data, current trends
and product information from buyers, as part of the process to determine the appropriate value of these provisions.
Goods in transit from overseas
Goods in transit from overseas are recognised when title to the goods is passed to the Group. Title to the goods is passed when valid documents
(which usually include a ‘bill of lading’) are received, and terms, as set out in a supplier’s letter of credit or in the supplier’s terms of trade, are met.
8.2 Trade and other receivables2017 2016
$000 $000
Trade receivables45,207 41,131
Prepayments9,453 11,092
Rebate accruals and other debtors16,428 24,836
Trade and other receivables71,088 77,059
Trade receivables arise from sales made to customers on credit or through the collection of rebates from suppliers not otherwise deducted from
suppliers’ payable accounts. Trade receivables are non-interest bearing and are generally on 30 to 60 day terms. Trade receivables are initially
recognised at the value of the invoice sent to the customer and subsequently at the amount considered recoverable. Collectibility of trade and other
receivables is reviewed on an ongoing basis and debts that are known to be uncollectible are either impaired or written off when they are identified.
8.3 Trade and other payables2017 2016
$000 $000
Trade creditors and accruals204,784 198,828
Goods in transit creditors21,187 19,673
Capital expenditure creditors2,802 9,412
Goods and services tax10,768 11,109
Reward schemes, lay-bys, Christmas club deposits and gift vouchers15,820 18,010
Contingent consideration– 1,000
Interest accruals1,089 1,597
Payroll accruals10,854 11,679
267,304 271,308
Trade payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts
are normally unsecured and are usually settled within 60 days of recognition. Due to the short term nature of these payables, their carrying value is
assumed to approximate their fair value.
8.4 Provisions
CURRENTNON-CURRENTTOTAL
2017 20162017201620172016
$000 $000 $000 $000 $000 $000
Employee entitlements43,720 53,395 11,973 10,861 55,693 64,256
Make good provision1,123 1,142 6,889 6,471 8,012 7,613
Sales returns provision3,708 3,689 – –3,708 3,689
Onerous lease1,218 689 516 518 1,734 1,207
Total Provisions49,769 58,915 19,378 17,850 69,147 76,765
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation.
Employee entitlements
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months
of the reporting date are recognised in provisions in respect of employees’ services up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured
at the rates paid or payable.
(ii) Performance based compensation
The Group recognises a liability and expense for incentives payable to employees where either a contractual or constructive obligation arises to pay
an employee based on achieving an agreed level of individual and company performance.
(iii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage
and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the
reporting date on New Zealand government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
Make good provision
The Group has an obligation to restore certain leasehold sites to their original condition when the lease expires. This provision represents the present
value of the expected future make good commitment. Amounts charged to the provision represent both make good costs incurred and costs
incurred which mitigate the final liability prior to the lease expiry.
Sales return
The Group provides various guarantees and warranties to replace, repair or refund customers for faulty or defective products sold. This provision
represents the estimated sales return obligation at balance date based on historical sale return rates.
Onerous lease
A provision for an onerous lease is recognised when the Group retains a lease obligation after vacating a property before the expiry of the lease term.
9.0 NON CURRENT ASSETS
9.1 Property, plant and
equipment
LAND AND BUILDINGSPLANT AND EQUIPMENTWORK IN PROGRESSTOTAL
NOTE2017 2016201720162017201620172016
$000 $000 $000 $000 $000 $000 $000 $000
Cost145,647 172,828 570,260 550,739 23,606 15,264 739,513 738,831
Accumulated depreciation(10,318)(11,875)(405,875)(371,861)– –(416,193)(383,736)
Opening carrying amount135,329 160,953 164,385 178,878 23,606 15,264 323,320 355,095
Additions2.2 10,803 7,188 44,617 40,830 (3,587)8,342 51,833 56,360
Disposals(67,820)(31,374)(1,488)(3,626)––(69,308)(35,000)
Depreciation2.2 (1,129)(1,438)(51,497)(51,697)––(52,626)(53,135)
Closing carrying amount77,183 135,329 156,017 164,385 20,019 23,606 253,219 323,320
Cost87,833 145,647 603,888 570,260 20,019 23,606 711,740 739,513
Accumulated depreciation(10,650)(10,318)(447,871)(405,875)––(458,521)(416,193)
Closing carrying amount77,183 135,329 156,017 164,385 20,019 23,606 253,219 323,320
Less: Assets held for sale–(49,982)(1,044)––(2,295)(1,044)(52,277)
Property, plant and equipment77,183 85,347 154,973 164,385 20,019 21,311 252,175 271,043
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. The cost of purchased property, plant
and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs, which have been
incurred in bringing the assets to the location and condition necessary for their intended use.
Property, plant and equipment are depreciated on a straight line basis to allocate the cost, less any residual value, over their useful life. The estimated
useful life of property, plant and equipment are as follows:
Freehold land indefinite
Freehold buildings 50 – 100 years
Plant and equipment 3 – 12 years
Work in progress not depreciated
The Group annually reviews the carrying amounts of property, plant and equipment for impairment. An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. In assessing whether an asset
is impaired, reference is made to individual store profitability and any other known events or circumstances that may indicate that the carrying
amount of an asset may be impaired.
Gains and losses on disposals of assets are determined by comparing proceeds with the carrying amount. These gains and losses are included in the
income statement. Costs incurred on repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Held for sale
Current year assets held for sale form part of a disposal group associated with the Group’s exit from its discontinued Financial Services operations (refer
note 16.0). The prior year asset held for sale related to the Group’s Newmarket store property, which was sold in July 2017 and is part of the gain from
property disposals (refer note 5 (b)) in the current year.
82
NOTES TO THE FINANCIAL STATEMENTS
83
NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements – Operating Assets and Liabilities
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
Notes to the Financial Statements – Financing and Capital Structure
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
9.2 Intangible assets
GOODWILLBRAND NAMESCOMPUTER SOFTWARETOTAL
NOTE2017 2016201720162017201620172016
$000 $000 $000 $000 $000 $000 $000 $000
Cost117,094 107,871 23,523 23,523 124,401 110,088 265,018 241,482
Impairment & accumulated amortisation (11,302)(11,302)– – (83,048)(78,474)(94,350)(89,776)
Opening carrying amount105,792 96,569 23,523 23,523 41,353 31,614 170,668 151,706
Acquisition of subsidiaries– 11,700 – – – – – 11,700
Additions2.2 – – – – 12,131 17,066 12,131 17,066
Disposals– (2,477)– – (427)(802)(427)(3,279)
Impairment15.2 (22,714)– – – (17,347)– (40,061)–
Amortisation2.2 – – – – (7,565)(6,525)(7,565)(6,525)
Closing carrying amount83,078 105,792 23,523 23,523 28,145 41,353 134,746 170,668
Cost117,094 117,094 23,523 23,523 133,178 124,401 273,795 265,018
Impairment & accumulated amortisation (34,016)(11,302)– –(105,033)(83,048)(139,049)(94,350)
Closing carrying amount83,078 105,792 23,523 23,523 28,145 41,353 134,746 170,668
Less: Assets held for sale16––––(7,020)–(7,020)–
Intangible assets83,078 105,792 23,523 23,523 21,125 41,353 127,726 170,668
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration paid above the fair value of the net identifiable
assets, liabilities and contingent liabilities acquired.
Brand names
Brand names acquired in a business combination are recognised at fair value at the acquisition date. Brand names are considered to have indefinite
useful lives as the Group have rights to use these names in perpetuity.
Impairment of goodwill and brand names
Assets that have an indefinite useful life are reviewed annually for impairment or whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount.
Computer software
All costs directly incurred in the purchase or development of computer software or subsequent upgrades and enhancements, which can be reliably
measured and are not integral to a related asset, are capitalised as intangible assets. Computer software is amortised on a straight line basis over a
period of between two to fifteen years. Costs incurred on computer software maintenance are expensed to the income statement as they are incurred.
Financial Services Group impairment
The Group fully impaired all the goodwill attributed to the Financial Services Group when it released its 2017 half year results following a review by the
Board of forecast strategies and after assessing the length of time required to achieve profitability. Since this initial review the Board has decided to sell
its investment in the Financial Services Group. Following balance date the Group reached an agreement to sell the business except for Diners Club (NZ),
to Finance Now, a subsidiary of SBS Bank (refer note 15.3). Based on management’s assessment of the expected net proceeds to be realised as part of
the business sale the Group has made a further impairment, this time to the carrying value of computer software to reduce its carrying amount to its
anticipated net realisable value (refer note 15.2).
Prior year acquisition and business disposal
In the prior year the goodwill arising from the acquisition of subsidiaries ($11.700 million) relates to the Group’s acquisition of the 51% majority
shareholding in The Warehouse Financial Services Limited from its joint venture partner in September 2015. The goodwill linking to disposals relates to
the sale of the Pet.co.nz business ($2.477 million) in January 2016.
Significant judgements and estimates – impairment testing
Impairment of indefinite life intangible assets is assessed by comparing the recoverable amount of a cash generating unit with its carrying value. Assets
are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units), which also represent the lowest level
within the Group at which these assets are monitored for internal management purposes. The allocation of the Group’s significant carrying amounts of
Goodwill and Brand names to cash generating units at balance date are set out in the table below.
The recoverable amount of a cash generating unit is calculated as the higher of ‘value in use’ or its ‘fair value less costs to sell’. The recoverable amounts
are determined using either of these two prescribed discounted cash flow valuation methods, which require the use of estimates and projections
regarding future business unit operating performance. The Group considers a wide range of factors including the Group’s financial budgets, strategic
plans, external benchmarks and historical performance to formulate future cashflow projections. The Group also engages external advisors to determine
appropriate discount rates and long term growth rates, integral to the valuations. Cash flows beyond the projection period are extrapolated using the
estimated growth rates stated below. These growth rates do not exceed the long term average growth rate for the sector in which the business unit
operates.
Impairment testing
NOEL LEEMINGTORPEDO7TWP NO.3
2017 20162017201620172016
$000 $000 $000 $000 $000 $000
Goodwill31,776 31,776 25,622 25,622 21,450 21,450
Brand names15,500 15,500 8,023 8,023 – –
Closing carrying amount47, 276 47, 276 33,645 33,645 21,450 21,450
Key assumptions
EBIT margin (%)
2.6 2.3 6.0 7. 6 6.3 5.7
Terminal growth rate (%)1.7 1.6 1.7 1.6 1.7 1.6
Post-tax discount rate (%)10.9 10.7 11.7 11.6 12.6 12.4
Noel Leeming and Torpedo7 cash generating units refer to the business segments detailed in note 2.0. TWP No.3 represents the amalgamation of the
trading activities of the Insight business acquired in September 2012 and CES business acquired in February 2013 and forms part of The Warehouse
reporting segment. The trading activities of TWP No.3 include the sourcing and wholesaling of product for other group companies. The impairment
tests have been prepared using a 5 year model.
With the exception of the impairment of the Financial Services business referred to above the current year impairment testing did not indicate the
carrying amounts of either goodwill or brand names to be impaired. The recoverable amount of the Torpedo7 CGU exceeded its carrying amount
by $5.683 million.  The cash flow projections in the Torpedo7 model assumes an average annual growth rate in sales of 7.6% and an increase in gross
margins from 24% to 28% over the 5 year projection period. A reduction of more than 100 basis points in any of the key assumptions, taken in isolation,
could result in the recoverable amount being less than the carrying amount.
10.0 BORROWINGS
10.1 Net debt2017 2016
$000 $000
Cash on hand and at bank47,492 49,881
Bank borrowings at call – interest rate: 2.96% (2016: 3.18%)49,159 123,980
Lease liabilities434 1,222
Current borrowings49,593 125,202
Bank borrowings – interest rate: 2.48% (2016: 2.98%)35,000 40,000
Lease liabilities169 490
Fixed rate senior bond (coupon: 5.30%)125,000 125,000
Fair value adjustment relating to senior bond interest rate hedge 541 738
Unamortised capitalised costs on senior bond issuance(1,257)(1,694)
Non-current borrowings159,453 164,534
Securitised borrowings – interest rate 2.68% (2016: 3.06%)56,717 60,125
Total borrowings265,763 349,861
Net debt218,271 299,980
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the net proceeds and the redemption amount is recognised in the income statement over the period of the borrowings using
the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance date.
Cash on hand and at bank
Cash on hand and at bank includes EFTPOS (electronic funds transfer point of sale) transactions which have not been cleared by the bank. The Group’s
balance date is always a Sunday, which means the three previous day’s store sales that have been paid by EFTPOS remain uncleared at balance date.
Securitised borrowings
The Group used a securitised borrowing facility to fund part of the Group’s discontinued Financial Services operations. The facility permitted the
Finance Services Group to borrow up to 80% of the value of qualifying securitised finance business receivables. The Group’s securitised borrowing
facility was included as part of the sale of the Financial Services businesses (refer note 15.3) on 9 September 2017.
Fixed rate senior bond
The Group issued a five-year fixed rate senior bond on the New Zealand Stock Exchange in June 2015 with a 5.30% coupon. Interest on the bond is
payable every six months (15 June and 15 December) and has a final maturity in June 2020. Based on the last quoted closing price of $1.04087 (2016:
$1.06261) traded on the New Zealand Stock Exchange and a market yield of 4.03% (2016: 3.74%), the fair value of the Group’s fixed rate senior bonds at
balance date was $130,109 million (2016: $132.826 million). For accounting purposes (NZ IFRS 13), this is deemed a level 1 fair value measurement as it is
derived from a quoted price, in an active market.
10.2 Net interest expenseNOTE20172016
$000 $000
Interest on bank overdrafts266 36
Interest on deposits and use of money interest received(150)(204)
Interest on bank borrowings9,330 10,850
Interest on finance leases87 184
Interest on fixed rate senior bond7,043 7,0 2 5
Net interest expense16,576 17,891
Less interest attributable to discontinued operations15.1(4,049)(3,737)
Net interest expense from continuing operations12,527 14,154
10.3 Bank facilities2017 2016
$000 $000
Bank debt facilities280,000 340,000
Bank facilities used(84,159)(163,980)
Unused bank debt facilities195,841 176,020
Securitised debt facility150,000 225,000
Securitised facility used(56,717)(60,125)
Unused securitised bank debt facility 93,283 164,875
Letters of credit facilities32,389 32,566
Letters of credit(13,153)(21,370)
Unused letter of credit facilities19,23611,196
Total unused bank facilities308,360352,091
84
NOTES TO THE FINANCIAL STATEMENTS
85
NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements – Financing and Capital Structure
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
Notes to the Financial Statements – Financing and Capital Structure
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
11.0 EQUITY
11.1 Capital management
Capital is defined by the Group to be the total equity as shown in the balance sheet. The Group’s capital management objectives are to safeguard
the Group’s ability to continue as a going concern, to provide an appropriate rate of return to shareholders and to optimise the Group’s cost of capital.
The Group regularly reviews its capital structure and may make adjustments by means including changes to the Group’s dividend pay-out ratio, issue
of new shares, debt issuance, sale of assets or a combination of these.
The Group has previously viewed the funding of the balance sheet as having two distinct parts, with the discontinued Financial Services Group
being separately financed from the Retail Group, which allowed the Financial Services Group to have higher gearing levels. Gearing is a measure of a
company’s financial leverage and shows the extent to which its operations are funded by lenders (debt) versus shareholders (equity). The Financial
Services Group was primarily financed by a debt securitisation programme which allowed it to borrow up to 80% of the value of its qualifying
securitised finance business receivables. The debt securitisation facility was sold after balance date as part of the Financial Services Group business sale
as referred to in note 15.3.
The Retail Group is financed through a mixture of bank borrowings and a fixed rate senior bond. The Retail Group currently aims to maintain gearing
levels, with the exception of the Group’s first quarter peak funding period, at levels of between 30% to 40%. The Group’s longer term target is to reduce
gearing below 30% within a three-year time frame.
The Group’s dividend policy is based on distributing between 75% to 85% of the adjusted net profit of the Retail Group back to shareholders (refer note 7.0).
Externally imposed capital requirements
Retail Group borrowings are subject to a negative pledge contained in two separate trust deeds held for the benefit of the Group’s banking institutions and
bondholders. The trust deeds provide a guarantee that the parent and its guaranteeing Group companies will comply with certain quarterly debt ratios and
restrictive covenants. The two principal covenants, which are the same for both trust deeds are:
DEBT COVENANT RATIOS AT BALANCE DATEQUARTERLY COVENANT REQUIREMENT2017 2016
Retail Group book gearing ratio (percentage)will not exceed 60% in the first quarter ending October or exceed
50% in each of the remaining three quarters of the year
26.936.9
Retail Group book interest cover (times cover)will not be less than 2 times operating profit
7.77. 3
The Group was in compliance with the negative pledge covenants throughout the current and previous financial year.
11.2 Contributed equity
CONTRIBUTED EQUITYORDINARY SHARES
2017 201620172016
$000 $000 000s 000s
Share capital365,517 365,517 346,843 346,843
Treasury shares(7,471)(7,832)(2,346)(2,348)
Contributed equity358,046 357,685 344,497 344,495
Ordinary shares are classified as equity. Incremental costs, directly attributable to the issue of new shares, are shown in equity as a deduction from
the proceeds of the share issue.
Where the Group purchases its own equity share capital (treasury shares), the consideration paid, including any directly attributable incremental
costs, is deducted from equity attributable to the shareholders until the shares are cancelled or reissued. Where such shares are reissued, any
consideration received, net of any directly attributable incremental transaction costs, is included in equity attributable to shareholders.
Treasury shares
TREASURY SHARESORDINARY SHARES
NOTE2017 201620172016
$000 $000 000s 000s
Opening balance7,832 7,302 2,348 2,134
Ordinary shares issued to settle share rights plan obligations14.0 (2,509)(2,001)(902)(708)
Ordinary shares purchased (average purchase price $2.39 – 2016: $2.74)2,148 2,531 900 922
Closing balance7, 47 1 7,832 2,346 2,348
Ordinary shares on issue are fully paid and carry one vote per share and participate equally in dividends, other distributions from equity and any surplus
on a winding up of the Group. The Group retains its own ordinary shares, which are used for employee share based payment arrangements. Voting
rights attached to the shares are held by the trustees of the employee share plans, and dividends paid on the shares are retained by the trustee for the
benefit of the Group.
11.3 Reserves2017 2016
$000 $000
Cash flow hedge reserve(14,157)(20,986)
De-designated derivative reserve(1,017)(1,453)
Hedge reserves(15,174)(22,439)
Share based payments reserve2,138 3,623
Total reserves(13,036)(18,816)
Cash flow hedge reserve
This reserve records the portion of the gain or loss on a hedging derivative in a cash flow hedge that is determined to be an effective hedge. The
cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts the income statement,
or, depending on the nature of the hedge, is included in a non-financial hedged item when the hedged event occurs. (Refer also to the consolidated
statement of changes in equity and policy notes detailed in note 12.2.)
De-designated derivative reserve
The de-designated derivative reserve is used to record the after tax mark to market losses realised from realigning the Group’s interest rate hedge
portfolio in June 2015 which resulted in a number of interest rate swaps being monetised. The cost to close the interest rate swaps is recognised in the
income statement over the effective period of the original interest rate swaps. (Refer also to the consolidated statement of changes in equity and policy
notes detailed in note 12.2.)
Share based payments reserve
Share rights are granted to employees in accordance with the Group’s executive share rights plan. The fair value of share rights granted under the
plan are measured at grant date and recognised as an employee expense over the vesting period with a corresponding increase in equity. The fair
value at grant date of the share rights are independently determined using an appropriate valuation model that takes into account the terms and
conditions upon which they were granted. (Note 14.0 provides further details regarding the plan and fair value calculations.)
This reserve is used to record the accumulated value of the unvested shares rights, which have been recognised as an expense in the income
statement. Upon the vesting of share rights, the balance of the reserve relating to the share rights is offset against the cost of treasury stock allotted
to settle the obligation, with any difference in the cost of settling the commitment transferred to retained earnings. (Refer also to the consolidated
statement of changes in equity.)
11.4 Minority interest2017 2016
$000 $000
Opening balance167 1,910
Purchase of minority interest– (2,359)
Minority interest capital contribution
750 –
Net profit attributable to minority interest302 4,138
Dividends paid to minority shareholders(352)(3,522)
Closing balance867 167
At balance date the Group’s minority interest represents the 50% minority shareholding held in Waikato Valley Chocolates. In March 2017 both the
Group and the Waikato Valley Chocolates’ minority shareholders each invested an additional $0.750 million of share capital of the business.
Prior year Torpedo7 minority purchase
In March 2016 the Group acquired the remaining 20% of the share capital of Torpedo7 Limited for a consideration of $9.800 million, increasing the
Group’s interest in the Torpedo7 group of companies from 80% to 100%.
86
NOTES TO THE FINANCIAL STATEMENTS
87
NOTES TO THE FINANCIAL STATEMENTS

12.0 FINANCIAL RISK MANAGEMENT
12.1 Financial risk factors
The Group’s activities expose it to various financial risks, including liquidity risk, credit risk and market risk (including currency risk and interest rate risk).
The Group’s overall risk management programme focuses on the uncertainty of financial markets and seeks to minimise potential adverse effects on the
Group’s financial performance.
The Group enters into derivative transactions, principally interest rate swaps and forward currency contracts. The purpose is to manage the interest rate
and currency fluctuation risks arising from the Group’s operations and sources of finance.
Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. Group Treasury
identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall
risk management, as well as written policies covering specific areas, such as mitigating foreign exchange, interest rate and credit risks, use of derivative
financial instruments and investing excess cash.
12.2 Derivative financial instruments
CURRENCY CONTRACTSINTEREST RATE SWAPSTOTAL
2017 20162017201620172016
$000 $000 $000 $000 $000 $000
Current assets– 621 – – – 621
Non-current assets– – 541 738 541 738
Current liabilities(16,899)(24,263)(400)(870)(17,299)(25,133)
Non-current liabilities– – (2,507)(4,845)(2,507)(4,845)
Total derivative financial instruments(16,899)(23,642)(2,366)(4,977)(19,265)(28,619)
Classified as:
Cash flow hedges
(16,899)(23,642)(2,907)(5,715)(19,806)(29,357)
Fair value hedges– – 541 738 541 738
Total derivative financial instruments(16,899)(23,642)(2,366)(4,977)(19,265)(28,619)
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature
of the item being hedged. For the purposes of hedge accounting, hedges are classified as:
• Cash flow hedges when they hedge an exposure to a highly probable forecast transaction; or
• Fair value hedges when they hedge the exposure to changes in fair value of a recognised asset or liability.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking the hedge transactions. An assessment, both at hedge inception and on an ongoing basis,
is also documented, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in
offsetting changes in fair values or cash flows of hedged items.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the
cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance
when the forecast interest payment that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition
of a non-financial asset (for example, inventory), the gains and losses previously deferred in equity are transferred from equity and included in the
measurement of the initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income
statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any
changes in the fair value of the hedged asset or liability that are attributed to the hedged risk. The Group only applies fair value hedge accounting for
hedging fixed interest on borrowings. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate borrowings and changes
in the fair value of the fixed rate borrowings attributable to interest rate risk are recognised in the income statement within net interest expense.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item, for which the effective
interest method is used, is amortised over the period to maturity.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for
hedge accounting are recognised immediately in the income statement.
Significant judgements and estimates
The Group’s derivatives are not traded in an active market, which means quoted prices are not available to determine the fair value. To determine the fair
value, the Group uses valuation techniques which rely on observable market data. The fair value of forward exchange contracts is determined using the
forward exchange market rates at the balance date and interest rate swaps are calculated as the present value of estimated future cash flows, based on
the applicable market interest yield rates at balance date. For accounting purposes (NZ IFRS 13), these valuations are deemed to be Level 2 fair value
measurements as they are not derived from a quoted price in an active market but, rather, a valuation technique that relies on other observable market data.
The Group uses an independent advisor to help determine the fair value of its derivatives.
12.3 Liquidity risk
Liquidity risk arises from financial liabilities of the Group and the Group’s subsequent ability to meet the obligation to repay these financial liabilities as
and when they arise.
The Group divided its funding requirements between funding for its retail operations and funding for the discontinued financial services business. The
funding for the financial services business was provided by means of a debt securitisation programme (refer note 10.1). The debt securitisation facility
was sold after balance date as part of the Financial Services Group business sale (note 15.3).
The Retail Group’s liquidity position fluctuates throughout the year. The months leading up to the Christmas trading period typically put the greatest
strain on cash flows due to the build up of inventory, conversely, the Retail Group’s liquidity position is at its strongest immediately after the Christmas
trading period. The Retail Group’s gearing covenants increase from 50% to 60% for the first quarter of each financial year to allow for the effect
of seasonal funding. To accommodate the increased funding requirements during the peak funding period, the Group has committed three month
seasonal credit facilities, commencing in mid September, of $50.000 million (2016: $50.000 million), which are in addition to the $280.000 million (2016:
$340.000 million) of committed credit facilities (refer note 10.3). The Group has set treasury policy limits to ensure it maintains and operates within its
available funding facilities.
LIQUIDITY POSITION AT BALANCE DATETREASURY POLICY REQUIREMENT2017 2016
Retail Group unused debt facilities (refer note: 10.3)committed credit facilities to be maintained at an amount
of at least 115% of peak funding requirements projected for
the next 2 years
69.9%51.8%
Retail Group funding tenorat least 30% of the committed credit facilities have a
maturity of greater than 3 years (includes retail bond)
30.0%35.5%
Retail Group funding diversity (number of counterparties)funding to be sourced from a minimum of four
counterparties (includes retail bond)
6 6
The table below analyses the Group’s financial liabilities and derivatives into relevant maturity bands, based on the remaining period from balance date
to the contractual maturity date. The cash flow amounts disclosed in the table represent undiscounted cash flows liable for payment by the Group.
The forward currency contracts ‘outflow’ amounts disclosed in the table represent the gross amount payable by the Group for the purchase of foreign
currency, whereas the ‘inflow’ amounts represent the corresponding receipt of foreign currency arising from settlement of the contracts, converted
using the spot rate at balance date.
Contractural maturity analysis
0 – 1 YEAR1 – 3 YEARS> 3 YEARSTOTAL
2017 20162017 20162017 20162017 2016
$000 $000 $000 $000 $000 $000 $000 $000
Trade and other payables(271,443)(271,308)– – – – (271,443)(271,308)
Bank borrowings(84,159)(163,980)– – – – (84,159)(163,980)
Securitised borrowings(56,717)(60,125)– – – (56,717)(60,125)
Finance lease liabilities(464)(1,303)(175)(489)(4)(29)(643)(1,821)
Fixed rate senior bond(5,790)(5,771)(138,250)(13,250)– (131,625)(144,040)(150,646)
Financial liabilities(418,573)(502,487)(138,425)(13,739)(4)(131,654)(557,002)(647,880)
Forward currency contracts–
– outflow(331,674)(363,291)– – – – (331,674)(363,291)
– inflow313,851 337,438 – – – – 313,851 337,438
Interest rate swaps(667)(1,667)(73)(1,036)(1,693)(2,728)(2,433)(5,431)
Net derivatives(18,490)(27,520)(73)(1,036)(1,693)(2,728)(20,256)(31,284)
12.4 Credit risk
Credit risk arises from the financial assets of the Group which are exposed to potential counter-party default, with a maximum exposure equal to
the carrying amount of these assets. In the normal course of business, the Group incurs credit risk from finance business receivables, trade and other
receivables, derivatives and transactions with financial institutions.
The Group places its cash and short-term investments and derivatives with high credit quality financial institutions approved by Directors and in
accordance with specified Treasury Policy limits. The Group’s Treasury Policy requires bank counter-parties to have a minimum Standard & Poor’s credit
rating of at least A (2016: A).
The Group controls its credit risk from finance business receivables, trade and other receivables by the application of credit approval, limits and
monitoring procedures. Receivable balances are monitored on an ongoing basis to ensure the Group’s bad debt exposure is not significant.
Concentrations of credit risk exist when changes in economic, industry or geographical factors similarly affect the group of counterparties whose
aggregate credit exposure is significant in relation to the Group’s total credit exposure. As the Group transacts with a diversity of counterparties it does
not have any significant exposure to any individual customers, industry or economic sector.
Notes to the Financial Statements – Financial Risk Management
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
Notes to the Financial Statements – Financial Risk Management
FOR THE 52 WEEK PERIOD ENDED 30 JULY 2017
88
NOTES TO THE FINANCIAL STATEMENTS
89
NOTES TO THE FINANCIAL STATEMENTS