The Warehouse Group FY23 Interim Results
Results for announcement to the market
Name of issuer The Warehouse Group Limited
Reporting Period 26 weeks to 29 January 2023
Previous Reporting Period 26 weeks to 30 January 2022
Currency New Zealand dollars
$1,813,187
$1,813,187
$17,363
$17,363
Interim Dividend
Record Date Not applicable
Dividend Payment Date Not applicable
Contact phone number
Contact email address
Date of release through MAP
Unaudited financial statements accompany this announcement.
The Warehouse Group Limited
Results for announcement (for Equity and Debt Security issuer)
Amount (000s)Percentage change
Revenue from continuing
operations
Net profit/(loss) from
continuing operations
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Jonathan.Oram@thewarehouse.co.nz
60.7 cents (29 January 2023) 80.9 cents (30 January 2022)
The investor presentation and media release which accompany this
announcement, provide information and commentary to explain the financial
performance of the Group for the 26 week period ended 29 January 2023.
up 4.8 %
up 4.8 %
Current period
down (60.9)%
Imputed amount per
Quoted Equity Security
Net tangible assets per
Quoted Equity Security
down (60.9)%
Total Revenue
Total net profit/(loss)
Amount per Quoted Equity
Security
23 March 2023
$0.00000000
$0.00000000
Authority for this announcement
Name of person authorised to
make this announcement
Contact person for this
announcement
Jonathan Oram (Group Chief Financial Officer)
Jonathan Oram (Group Chief Financial Officer)
09 217 7651
Prior comparable period
---
To: NZX Limited
Auckland, Thursday 23 March 2023
The Warehouse Group FY23 Interim Results announcement
The Warehouse Group announced half year results for the six months ending 29 January 2023, with
Group sales of $1.813 billion, up 4.8% compared to FY22 half year
1
.
The FY23 first quarter saw strong sales compared to the COVID-19 impacted FY22 first quarter, with
sales up 21.2%. Sales slowed in the FY23 second quarter, down 4.6% compared to FY22 Q2 which
had seen sales surge as customers returned to store after periods of extended lockdowns.
Gross profit was $592.4 million, down 1.2% or $7.2 million from $599.6 million in FY22 H1. Gross
profit was adversely impacted by product category mix particularly in The Warehouse, increased
clearance activity following slower than expected sell through during the Q2 period, and purposeful
investment in the Group MarketClub membership programme, which now has more than 1 million
members across the Group. Gross profit margin decreased 200 basis points to 32.7% from 34.7% in
FY22 H1 and from the highs of 36.2% in FY21 H1.
The gross profit decline in combination with a 3.5%, $19.1m increase in costs of doing business, and
unusual expenses of $6.3million resulted in Reported Net Profit After Tax (NPAT) decreasing 60.9%
to $17.4 million in FY23 H1 against $44.4 million in FY22 H1.
Group CEO Nick Grayston commented, “It has been a challenging trading environment. With high
inflation and continuing cost of living pressures, we remain committed to offering Kiwis great value.
We are purposefully keeping our prices as low as possible on key essentials for Kiwi families, and we
have further invested in value for our customers by offering discounts on key items for our
MarketClub members.”
1
Prior period comparison refers FY22 H1, being the six months ending 30 January 2022.
• Sales growth to $1.8bn – up 4.8% on prior period
1
• Gross profit $592.4m – a decrease of 1.2% from $599.6m in prior period
• Gross profit margin 32.7% - down from 34.7% in FY22 H1 due to category mix and
increased promotional spend including MarketClub
• Cost of doing business increased 3.5%, but reduced as a percentage of sales compared
to FY22 H1 from 31.4% to 31.0%
• Unusual expenses of $6.3m in relation to restructuring
• Reported Net Profit After Tax (NPAT) $17.4m - down 60.9% against Reported NPAT of
$44.4m in FY22 H1
• No interim dividend declared. Dividend decision reserved to year end
Sales performance
“We’ve had two quite different quarters – sales in the first quarter of FY22 were strong against a
COVID-19 impacted FY22 Q1, while the second quarter was noticeably softer.
“While we saw pleasing sales at The Warehouse with 13.2% growth in sales in the half year, Noel
Leeming is coming off prior peak years’ performance with customers slowing their spending on big
ticket items and working from home products. We’ve also seen Torpedo7 impacted by the global
decline in bike and fitness sales and more locally, a decrease in camping and water-related sporting
products due to the poor summer weather in the North Island,” said Mr Grayston.
During the half, customers returned to shopping in-store, with foot traffic increasing, and online
sales
2
decreasing compared to FY22 H1. Online sales made up 11.0% of total Group sales, compared
to 19.6% in FY22 H1, while click and collect sales
3
were broadly in line with prior period at 51.7% of
online sales, compared to 50.1% of online sales in FY22 H1.
Grocery growth
The Warehouse grocery category saw sales growth of 34.0% compared to prior period, now making
up 22.2% of The Warehouse total sales, compared to 18.8% in the prior period. Pantry and chilled
products are now in nearly 20% of The Warehouse customer shopping baskets in terms of units,
compared to 10% two years ago.
“Over the last six months we have continued to expand our grocery range, and recently launched a
fresh fruit and vegetable trial in six stores, which has been well received by our customers.”
Gross Profit Margins impacted
As previously noted, Group gross profit margin decreased 200 basis points to 32.7% in the half year.
The result was impacted by driving sales at value price points for our customers, decreased seasonal
sales due to adverse weather in the North Island, investment in the form of increased promotions
and member discounts in our Group membership programme, MarketClub, and investment in
grocery providing customers with value at a time of unfavourable cost increases.
Container detention costs
4
also contributed to margin decline in the half year. Due to shipping
delays and congestion, a container backlog was experienced at the Group’s distribution centres
which significantly increased detention costs.
Cost of doing business
Group cost of doing business (“CODB”) increased 3.5% largely due to planned core systems
development, for which a large proportion of these previously capitalised costs are now treated as
operating expenses under SaaS accounting standards. With this investment has also come an
2
Online sales include The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7, sales through 1-
day.co.nz and revenue from TheMarket.com; but excludes TheMarket.com Gross Merchandise Value (GMV).
3
Click and collect sales include sales through The Warehouse, Warehouse Stationery, Noel Leeming and
Torpedo7 only, excluding TheMarket.com sales.
4
Container detention costs relate to the cost of containers remaining at Distribution Centres beyond a free
period of time.
increase in recurring operating costs in licence fees, continuous improvement and support. In
addition, deprecation has increased 18% with the higher capital expenditure levels over the last
couple of years.
“Whilst we have reprioritised some digital initiatives, in response to more challenging conditions, we
remain committed to our long-term ecosystem strategy,” said Mr Grayston.
Key brand performance
The Warehouse sales increased 13.2% against the prior COVID-19 impacted period to $1,013.7
million. After a very strong first quarter which saw sales increase 39.0%, we saw softer trading in the
second quarter with sales up marginally at 0.3%. Operating Profit for the half year came in at $41.3
million, up $4.0 million (10.7%) on prior period, but at a lower growth rate than the increase in sales.
Warehouse Stationery sales increased 1.7% to $124.1 million, up 18.0% in Q1 and down 8.9% in Q2,
with transactions up 17%. Warehouse Stationery Operating Profit was $8.9 million in FY23 H1, down
8.0% due to a change in sales mix with a decrease in higher margin work/study from home products
and increased operating costs.
Noel Leeming sales decreased 4.5% compared to the prior period, to $556.7 million. Whilst there
was a modest improvement in FY23 Q1 with sales up 3.3% as we cycled against a lockdown period,
FY23 Q2 was impacted by the decline in consumer spending, with sales 9.9% down on the prior
period. Competitive trading, change in category mix of sales and increased cost of doing business
resulted in a decline in Operating Profit of 41.4% to $17.2 million.
Torpedo7 sales were down 1.1% in the first half to $96.4 million. While FY23 Q1 sales were strong
with 9.4% growth against the prior period, FY23 Q2 sales declined 6.8% as we lapped strong
consumer demand for outdoor adventure goods in FY22 Q2. Slower demand across bike and fitness
categories (also a global trend), and a weather-related decline in demand for camping and water
related sporting products. Combined with increased cost of doing business due to a larger store
network and investment in our new ERP system these factors have resulted in an Operating Loss of
$6.5 million in FY23 H1, compared to an Operating Profit of $1.5 million in FY22 H1.
TheMarket.com now has more than 4 million products available online, with 400,000 active
customers. The launch of Group Marketplace onto www.thewarehouse.co.nz in November 2022 has
meant thousands of third-party products are now available to The Warehouse online customers.
Total Group Gross Merchandise Value (including TheMarket.com GMV and sales on Group
Marketplace in TheWarehouse.co.nz) was $49.8 million in the half year. TheMarket.com made a
loss of $16.0 million in FY23 H1, compared to a loss of $12.0 million in FY22 H1.
Cash and liquidity
Net cash flow decreased by $31.7 million resulting in cash outflow of $42.2 million, and a net debt
position at half year end of $83.4 million. Month end creditor payments of $80.2 million were paid post
balance date on 29 January and pre-31 January 2023.
Committed bank facilities were $465.0 million at January 2023 (July 2022: $420.0 million), providing
the Group with total liquidity of $381.6 million at January 2023 (July 2022: $378.8 million) and
$301.4 million, adjusted for pre-31 January creditor payments.
Dividend
Due to the challenging economic outlook, financial performance remaining uncertain, and currently
heightened capital expenditure, the Board has decided not to pay an interim dividend and is
reserving its decision in relation to the payment of a dividend on the full year result.
Taking action
“We have experienced a very challenging retail trading environment in the last six months, and we
are taking decisive action to improve financial performance and operational efficiency across the
Group. This includes rebalancing capital expenditure to focus on operational performance and
reprioritising transformation projects to concentrate on EBIT delivery,” said Mr Grayston.
“We have made some difficult cost cutting decisions across the Group including reducing labour
costs at our Auckland Store Support Office, which will unfortunately see a reduction of up to 340
roles. We are also moving forward with the closure of 1-day operations and bringing TheMarket.com
and Torpedo7 into our Group operating structure. In particular, the closure of 1-day operations and
bringing TheMarket.com into our Group operating structure will significantly improve the cost
efficiencies of TheMarket.com business.
“Gross profit margin management will be particularly important in the second half, with a focus on
maintaining value for our customers while recalibrating some of the investment in margin that was
made in the first half,” said Mr Grayston.
Outlook
“We expect the remainder of FY23 to be challenging as we continue to face into the headwinds of
increasing cost of living pressures and rising interest rates which are impacting customer spend, as
well as increases to our own cost of doing business, including wage increases.
“While the macroeconomic outlook remains unpredictable, we are taking action to ensure the
ongoing improvement in operational performance. We are committed to our strategy to create a
future fit retailer to deliver great value for our customers, as well as completing existing major
programmes of work to deliver operational efficiencies,” said Mr Grayston.
Ends
Contact details regarding this announcement:
Investors and Analysts: Jonathan Oram, Chief Financial Officer
To be contacted via Kim Russell +64 21 452 860 kim.russell@thewarehouse.co.nz
Media: Jordan Schuler, Corporate Affairs Partner
+6421 143 6930 media.enquiries@thewarehouse.co.nz
---
FY23 Interim Results
Six months ending 29 January 2023
Chair’s Update –Joan Withers
Group Update –Nick Grayston
Group Financial Results –Jonathan Oram
FY23 Outlook –Joan Withers
Appendix A –Divisional Results
Appendix B –Additional Information
CONTENTS
3
7
19
30
35
41
2
CHAIR’S UPDATE
JOAN WITHERS
3
•Our thoughts are with all those impacted by the recent catastrophic Auckland floods and Cyclone Gabrielle, and particularly those
who have lost loved ones or have seen their homes devastated.We are very proud of our own teams who have stepped up –
serving our customers and distributing large quantities of goods and gift cards to those who really need them.
•A special mention to our teams in Napier, Hastings, Tairāwhiti, Northland, Auckland and Coromandel whose resilience and teamwork
has been nothing short of incredible in very difficult circumstances.
•We would also like to thank our amazing customers who have donated $200,000 through the “Add $1” campaign to raise money for
families affected by Cyclone Gabrielle –which we have matched from our community funds to raise a total of $400,000.
•None of our stores were significantly damaged by Cyclone Gabrielle. We did have some short-term store closures in Hawkes Bay
when the storm first hit.
OUR TEAMS HAVE STEPPED UP WHEN IT MATTERS MOST
4
5
•Whilst we are announcing strong first half sales, we have delivered a lower half year EBIT
1
result after
a record last two years, in a very testing retail environment where our customers are facing cost of
living pressures and the country is facing an uncertain economic outlook.
•We did have planned growth in CODB
2
, however we weren’t able to deleverage this quickly enough to
offset the decrease in gross margin which contributed to our EBIT decline.
•In a difficult peak and Christmas trading period, our Q2 results were disappointing. This would
normally be our strongest quarter.
•In these times of increased cost of living, we strive to continue to deliver value to our customers
across all our brands, by keeping our prices as low as possible despite the cost of goods increasing –
this has impacted our margins in this half year.
•We have had to reprioritisesome of our strategic initiatives as we manage cost out and navigate
through trading challenges.
•However, we are pleased about the enhancements we have achieved in our customer offering:
•We have taken great steps in our grocery offering at The Warehouse during this period. We
have expanded our ambient and chilled ranges and introduced a trial of fresh fruit and vegetable
offering in selected locations across New Zealand.
•We have increased our MarketCluboffers and membership base as we invest in first party
customer data and deliver increased customer value.
5
SALES GROWTH BUT A TOUGH RESULT IN A VERY
CHALLENGING MACRO-ECONOMIC ENVIRONMENT
1.Earnings Before Interest and Taxation.
2.Cost Of Doing Business.
5
FY23 H1 GROUP SUMMARY
Group sales $1.8 billion, up 4.8%
Best ever Group first half sales.
Very strong Q1 with sales up 21.2% followed by a
very challenging Q2 with cost of living impacting
Group sales, down 4.6%.
Gross Profit $592.4 million
Down 1.2%, or $7.2 million.
Gross Profit margin 32.7%
Down from 34.7% in FY22 H1 and from the high of
36.2% in FY21 H1.
The Warehouse sales up 13.2%
The Warehouse sales exceeded $1.0 billion for the
first half, our highest half year sales on record.
Grocery
(1)
sales grew 34.0%
in FY23 H1 (vs FY22 H1), making up 22.2% of
The Warehouse total sales
1.Grocery categories include pantry, confectionary and snacks, beverages, household consumables, health and beauty, and pet care.
2.Cost of Doing Business is presented excluding the impact of NZ IFRS 16. FY22 H1 CODB has been restated to include the impact of SaaS on CODB.
3.Adjusted NPAT is before unusual itemsand is a non-GAAP measure.A reconciliation between Adjusted and Reported NPAT is located on Slide 42 and in Note 5 of the financial statements for
the six months ending 29 January 2023.
Reported NPAT $17.4 million
Down 60.9% against the Reported NPAT result of
$44.4 million in FY22 H1.
Adjusted NPAT
(3)
$19.6 million
Down 53.4% against the Adjusted NPAT result of $42.0
million in FY22 H1.
CODB
(2)
increased 3.5% ($19.1 million)
Due primarily to increased information systems costs
as we progress through core system implementation,
combined with general inflationary pressures.
6
GROUP UPDATE
NICK GRAYSTON
7
THE HALF YEAR IN REVIEW
8
•Sales delivered a record result, $1.8 billion, up 4.8%
oParticularly strong in The Warehouse with record sales +13.2%;
oTorpedo7 suffering from global decline in bike, fitness and outdoor apparel, with local decline in
demand for camping and water-related sporting products due to poor weather in the North Island; and
oNoel Leeming is coming off peaks achieved during COVID-19 which saw consumer trends of buying
big ticket home items.
•However, Gross Profit Margin was eroded by 200 bps in the first half due to:
oIncreased investment into MarketClub;
oInvestment in Grocery despite an inequitable product cost environment;
oDecreased seasonal sales due to adverse weather in the North Island;
oKeeping inventory balances at optimal levels and aging under control; and
o$7.5 million of detention charges as a result of supply chain congestion.
•CODB was hard to deleverage quickly in season:
oWe chose to keep going on core systems renovations that were already in flight such as ERPFI, WMS,
MDM and GOMS, which resulted in increased SaaS software costs and depreciation;
oEmployee expenses increased as a result of minimum wage increases, collective agreements,
retention of key employees in a competitive labour market; and
oContinued investment in TheMarket.com at a time of significant decline in online penetration as post-
COVID-19 normalisation occurred.
•We have taken action:
oReprioritised transformation to concentrate on EBIT delivery;
oSome core system implementations are coming to an end and we are delaying some digital initiatives;
oContinue to reduce store labour costs by driving productivity improvements and efficiencies;
oClosure of 1-day operations and integration of The Market and T7 into Agile;
oReduction of up to 340 roles in Store Support Office;
oModeration on Grocery price reductions, but still better priced than the duopoly;
oReined in inventory –levels will reduce by financial year end; and
oReduced capital expenditure going forward.
8
vs FY21
H1 9.6%
vs FY21
H1 0.3%
1.Online Sales includes The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7, sales through 1-day.co.nz and revenue fromTheMarket.com; but excludes TheMarket.com Gross Merchandise Value(GMV).
2.Reported EBIT declined $33.5m due to Gross Profit down $7.2m, CODB up $19.1m, and unusual items of $6.3m and movement in IFRS-16impact.
3.Adjusted NPAT is before unusual itemsand is a non-GAAP measure.A reconciliation between Adjusted and Reported NPAT is located on Slide 42 and in Note 5 of the financial statements for the six months ending 29 January 2023.
Group sales up 4.8%
Best ever Group H1 sales with The
Warehouse leading Group brands up
13.2%
Online sales
(1)
$198.7m
Down 41.6% compared to FY22 H1,
making up 11.0% of total Group Sales,
compared to 19.6% in FY22 H1.
$1,683.4
$1,808.3
$1,730.0
$1,813.2
FY20 H1FY21 H1FY22 H1FY23 H1
$566.1
$655.4
$599.6
$592.4
FY20 H1FY21 H1FY22 H1FY23 H1
$44.4
$42.0
$17.4
$19.6
Reported NPATAdjusted NPAT
Reported NPAT $17.4m
Down 60.9% against the Reported
NPAT result of $44.4m in FY22 H1.
Adjusted NPAT
(3)
$19.6m
Down 53.4% against the Adjusted
NPAT result of $42.0m in FY22 H1.
vs FY22
H1 4.8%
FY23 H1 RESULTS –A CHALLENGING TIME FOR RETAIL
Gross Profit margin 32.7%
Down from 34.7% in FY22 H1 and
from the high of 36.2% in FY21 H1,
primarily due to category mix and
promotional activity, including
MarketClub.
Gross Profit of $592.4m decreased
1.2%, or $7.2m.
vs FY22
H1 60.9%
Reported EBIT
(2)
$45.5m
Reported Earnings Before Interest and
Tax (EBIT) includes net impact from
Software as a Service spend now
included in cost of doing business
(CODB).
CODB increased 3.5% ($19.1m)
combined with unusual items of $6.3m
in relation to restructuring.
vs FY22
H1 1.2%
vs FY22
H1 42.3%
Group Sales ($m)Gross Profit ($m)Reported EBIT ($m)Reported and
Adjusted NPAT ($m)
$79.0
$45.5
FY22 H1FY23 H1
FY22 H1 FY23 H1 FY22 H1 FY23 H1
vs FY22
H1 53.4%
9
Reported NPAT Adjusted NAPT
DIVISIONAL SUMMARY
SalesGross ProfitOperating Profit
(1)
FY23 H1
$million
FY22 H1
$millionVariance
FY23 H1
$million
%margin
FY22 H1
$million
%margin
Variance
vs FY22 H1
%
FY23 H1
$million
%margin
FY22 H1
$million
%margin
Variance vs
FY22 H1
$million
Variance
vs FY22 H1
%
1,013.7895.4+ 13.2%368.3
36.3%
358.1
40.0%
+ 2.8%
(370bps)
41.3
4.1%
37.3
4.2%
+ 4.010.7%
(10bps)
124.1122.0+ 1.7%57.0
45.9%
57.2
46.9%
(0.4%)
(100bps)
8.9
7.2%
9.7
7.9%
(0.8)(8.0%)
(70bps)
556.7582.7(4.5%)121.1
21.8%
130.9
22.5%
(7.5%)
(70bps)
17.2
3.1%
29.4
5.0%
(12.2)(41.4%)
(190bps)
96.497.5(1.1%)30.2
31.3%
34.8
35.7%
(13.1%)
(440bps)
(6.5)
(6.8%)
1.5
1.6%
(8.0)(527.7%)
(840bps)
21.933.0(33.8%)(16.0)(12.0)
(4.0)(33.7%)
0.4(0.8)153.4%(14.0)(8.7)
(5.3)(60.2%)
1,813.21,730.04.8%30.957.2
(26.3)(46.0%)
10
Other
(2)
1.Operating Profit includes the impact of SaaS but excludes the impact of NZ IFRS16 and unusual items and is a non-GAAP measure, refer to Note 4 of the Financial Statements for a reconciliation between Operating Profit and
Reported EBIT. A reconciliation between Operating Profit, Earnings Before Interest and Taxation (EBIT) and NPAT is located onSlide 42 and in Note 5 of the financial statements for the six months ending 29 January 2023.
2.Other items in operating profit include corporate costs and other unallocated overheads.
STRATEGIC REPRIORITISATION
WE HAVE A DIVERSIFIED RETAIL PORTFOLIO PROVIDING CUSTOMERS A WIDE RANGE OF SOLUTIONS
•Retail is operating in a tough environment with rising inflation, increased cost of living andrising interest rates, combined with
disposable income being skewed to travel, hospitality and entertainment.
•We are taking strategic reprioritisation actions across the Group –pausing on some projects and focussing on actions to provide
customers with products at great value, while protecting the impact on our own operations and near term operating profit.
•All elements of our ecosystem are important and we continue to believe in our long term strategy –but we are focussing on
components that will deliver near term benefits and reduce cost to serve and improve operating performance.
•In particular, we are focused on the following initiatives:
Reduce Cost of Doing Business –roll out initiatives to
manage labour cost and reduce information systems spend
Capital expenditure –rebalance capital expenditure to align
with reprioritisation and fit within reduced envelope
Integration of TheMarket.com and Torpedo7 –bring these
brands into the Agile operating structure as planned
Growth in Grocery –including Market Kitchen and fresh
offering to deliver what customers need at a competitive price
Group membership –continue to build MarketCluband other
membership programmes to leverage competitive advantage
Focus on operational performance –minimise cost to
serve, manage gross profit margin and reduce working capital
Improving financial performance
Improving operational efficiency and customer offering
11
ECOSYSTEM
OUR INTEGRATED
Helping Kiwis live better every day
iatangata, iarā
12
ERPFI
Enterprise Resource Planning Finance and Inventory
(ERPFI) system upgrade is the most significant of our core
system projects –we delivered the finance module in FY22,
with the inventory module on track for delivery in May 2023.
Work on ERP –Merchandise is commencing.
GOMS
Our cloud-based Group Order Management Solution
(GOMS) will deliver a group solution for all our brands;
improve our customer experience for online orders, delivery
and click and collect; and enable our ecosystem strategy.
Expected go live date is end FY23.
SIGNIFICANT PROGRESS ON CORE SYSTEMS
MDM
Human
Capital
Management
Torpedo7
ERP
Master Data Management(MDM) is fully deployed across all
our brands and products and is integrated into our ERP
Inventory, WMS and eCommerce platforms. Our lastiteration
will see us integrate supplier data from trade suppliers which
will allow suppliers to update item master data through a self-
service portal.This final iteration is scheduled for
completion in FY24.
HCM had a first release in October 2022 when we deployed
it for around 2,400 employees at the SSO and at selected
stores.Our final release will be in May when we will rollout
HCM to all stores and DC’s in addition to the Employee Self-
Service module.Integration of recruitment platform into HCM
is expected to be completed in June 2023.
Development work was completed on this project in
December 2022.Currently working through data migration
and testing with go-live scheduled for early FY24.
WMS
Warehouse Management System(WMS) was fully
implemented in FY22 and is in the process of being
optimised and a transition to a cloud version is in discovery.
13
THEMARKET.COM AND TORPEDO7
INTEGRATING INTO OUR AGILE OPERATING STRUCTURE
•We are bringing TheMarket.com and Torpedo7 into our Agile
operating structure –TheMarket.com has started this process
already, while Torpedo7 will move in August 2023.
•We will drive increased efficiency across the whole Group by:
•Leveraging Group resources across all our brands;
•Achieving synergies where possible in Group operations –
including distribution centres and customer care centres;
•Leveraging Torpedo7 expertise and volume in the adventure
category space;
•Lowering cost to serve;
•Prioritising investment in areas that will drive EBIT.
•This is resulting in a number of team member redundancies
across the Group, and in particular within these two brands.
14
★★★★★
Customer review
50k+3P
SKUs from
700+
brandson
The Warehouse
Group
GMV
1
$49.8m
1. Group Gross Merchandise Value (“GMV”) includes first and third party sales on TheMarket.com, and third party sales on Group marketplace.
AND OUR MARKETPLACE STRATEGY
•Since its launch in 2019, TheMarket.com has proven that
ascaled, marketplace model is a platform that thousands
ofcustomers and brands want to engage with.
•As we moveforward,we'retaking the best of TheMarket.com
and embedding itat the core of our Group online strategy. As
part of this strategy, we have closed our 1-day operations and
significantly reduced stand-alone costs for TheMarket.com.
•In November 2022, we launched Group marketplace into The
Warehouse site and app, whichmeansthatcustomers can
find even more of what they’re looking for.
•In FY23 H1, we had over 50k third-party SKUs from over 700
brands on The Warehouse site and app.
•Total Group GMV
1
of $49.8m in FY23 H1, including third-party
marketplace transactions across the Group.
•While Group Marketplace is still in its infancy, we have seen
good uptake from customers and suppliers are responding
positively to an additional channel for their product.
15
16
Launched
October
2021
1
Now more
than
1M+
active
members
2
MARKETCLUB
OUR GROUP MEMBERSHIP PROGRAMME
HAS ACHIEVED SCALE RAPIDLY ACROSS NEW ZEALAND
•Growing first party data across all our brands will be acompetitiveadvantage.
•MarketClubmembers represent our most engaged customers, with the highest lifetime value.
•Our top MarketClubmembers grew their average order value in The Warehouse at more than
triple the rate of non-membersin FY23 H1 vs the prior six months.
•In addition to spending more at each transaction with us, our top MarketClubmembers shop with
us more frequently, growing their average monthly frequency by 13% in FY23 H1 vs the prior six
months.
•Growth in identified customers supports Retail Media opportunities.
16
1.MarketClubwas already established on TheMarket.com and was launched in The Warehouse in October 2021.
2.Active members refer to members who have joined and have not cancelled their membership.
GROCERY –GROWTH IN AMBIENT AND TESTING FRESH
•Over the last 12-18 months we have been building our grocerybusiness,
which is focussed on core essentials at great every day prices.
•Grocery
1
sales grew 34.0% in FY23 H1 making up 22.2% of The Warehouse
sales. This support from our customer base has given us the confidence to
trial ambient fruit and vegetables, which is the natural progression for our
business building on the strength of our dry grocery offering.
•December 2022 inflation data showed the harsh reality of fruit and vegetables
inflation at record levels and outstripping dry groceries –and we want to offer
our customers fresh fruit and vegetables at value prices.
•There is a real need from customers to access competitive prices for fruit and
vegetables, our challenge is to access products at an equitable cost price.
•Our fresh model is very simple –we source local product predominantly,
wekeep the range really tight, and offer quality produce at great prices.
•Pantry/chilled products are now nearly 20% of The Warehouse customer
shopping baskets, compared to 10% two years ago
2
.
•The Warehouse now offer 55 individual product lines in our Market Kitchen
range –accounting for 24% of sales units within dry groceries.
1.Grocery categories include pantry, confectionery and snacks, beverages, household consumables, health and beauty, and pet care.
2.Average pantry and chilled products as a percentage of average basket units in January 2023 compared to January 2021.
17
Carried over 37,000unique private
label products with sustainable
materials or sourcing practices,
accounting for over $153 million in
sales during the six months to
January 2023, 28% of total private
label sales (up from 22% in FY22).
Carried over 10,000unique private
label products packaged according
to our sustainable packaging policy,
accounting for over $179 million in
salesduring the six months to
January 2023, 33% of total private
label sales (up from 22% in FY22).
Diverted69.5%of operational waste
from landfill.
6,496 tCO2e of Scope 1 and 2
emissions emitted in FY23 H1,
compared to 6,730 tCO2e in FY22
H1 –a decrease of 3.5%.
1
98% of passenger fleet is EV.
OUR SUSTAINABILITY TARGETS
1.GHG emissions are pre-verified and subject to change at The Warehouse Group end of year GHG emissions audit.
2.DynataPoll November 2022 NZ Herald -Rebuilding Better: Experts encouraged by Kiwis’ demand for climate action
Diverted 99.47 tonnesof post-
consumer waste from landfill.
Recycled 46.4 tonnes of soft
plastics and more than 20,000
unitsofink and toners, and other
hard to recycle items.
Expanded our e-waste
recyclingprogrammeto include
33storesacross the groupand
recycledmore than 40.5tonnes
ofe-wastethrough the initiative.
28 TheWarehouse Stores offer free
EV charging with 25kwDC rapid
chargers.
Climate action and sustainability is becoming increasingly important to our customers, with 60% of Kiwisbelieving New Zealand
should be taking stronger action
2
18
19
FINANCIALS
JONATHAN ORAM
GROUP
19
For the six months ended 29 January 2023
1.Operating Profit includes the impact of SaaS but excludes the impact of NZ IFRS16 and unusual items and is a non-GAAP measure. Refer to Note 4 of the Financial Statements for a reconciliation between
Operating Profit and Reported EBIT. A reconciliation between Operating Profit, Earnings Before Interest and Taxation (EBIT) and NPAT is located on Slide 42 and in Note 5 of the financial statements for the
six months ending 29 January 2023. The adjustments from Operating Profit to EBIT are restructuring costs of $6.3 million and IFRS16 adjustment of $20.9 million.
2.Adjusted Net Profit After Tax (NPAT) is before unusual itemsand is a non-GAAP measure.A reconciliation between Adjusted and Statutory NPAT is located on Slide 42 and in Note 5 of the financial
statements for the six months ending 29 January 2023.
The financial information included in this presentation, and in the
accompanying financial statements includes restated FY22 H1 to
include the change in how the Group accounts for Cloud Computing
Arrangements (Software as a Service, “SaaS Adjustment”).
•Strong Group sales increased 4.8% compared to FY22 H1 to a record
$1.8 billion.
•The Warehouse had a strong first half with 13.2% increased sales
followed by Warehouse Stationery with 1.7% increased sales. While Noel
Leeming and Torpedo7 reported decreased sales of 4.5% and 1.1%, as
they were impacted by contracting consumer spending and lapped very
strong prior periods.
•Gross Profit decreased slightly by 1.2% ($7.2 million), while Gross Profit
Margin was down 200 bps.
•CODB (excluding IFRS16) increased 3.5% ($19.1 million) but decreased
as a percentage of sales from 31.4% to 31.0%.
•Reported NPAT decreased 60.9% -including restructuring costs of
$6.3 million and increased interest costs.
$ millionFY23 H1FY22 H1Variance
Group Sales
1,813.2 1,730.0
4.8%
Gross Profit
592.4 599.6
(1.2%)
Gross Profit Margin32.7%34.7%(200)bps
Cost of doing business (“CODB”)
561.5 542.4
3.5%
CODB %31.0%31.4%(40)bps
Operating Profit
1
30.9 57.2
(46.0%)
Operating Profit Margin %1.7%3.3%(160)bps
Reported Earnings Before Interest
and Taxation (“EBIT”)
45.579.0
(42.3%)
Reported NPAT
17.4 44.4
(60.9%)
Adjusted NPAT
2
19.6 42.0
(53.4%)
Interim Dividends (cps)
-10.0
(10.0)
GROUP PERFORMANCE
20
•FY23 Q1 saw strong sales compared to FY22 Q1, lapping a COVID-19
impacted FY22, with sales up 21.2%.
•In comparison, FY22 Q2 sales surged after COVID-19 lockdowns were
lifted as customers returned to store, resulting in an FY23 Q2 sales
decline of 4.6% compared to this period.
•Group Gross Profit Margin in FY23 H1 was down 200 basis points on the
same period in FY22. Most of this decline occurred in Q2, which was
down 270 basis points compared to the same period in FY22.
•Online sales decreased compared to FY22 due to a combination of prior
period online sales being elevated due to COVID-19 restrictions and the
global trend of consumers switching back to in-store channel.
FY23 H1 RESULTS –Q1 and Q2 sales
21
For the six months ending
29 January 2023
Q1 –3 months ending OctoberQ2 –3 months ending January
FY23 H1 vs
FY22 H1
$ millionFY23 Q1FY22 Q1Variance %FY23 Q2FY22 Q2Variance %
The Warehouse 414.6 298.2 + 39.0% 599.1 597.2 + 0.3% 13.2%
Warehouse Stationery56.9 48.2 + 18.0% 67.2 73.8 (8.9%)1.7%
Noel Leeming246.6 238.7 + 3.3% 310.1 344.0 (9.9%) (4.5%)
Torpedo737.4 34.2 + 9.4% 59.0 63.3 (6.8%) (1.1%)
Group Sales764.7 630.7 + 21.2% 1,048.5 1,099.3 (4.6%) + 4.8%
Gross Profit
247.3207.8
+ 19.0%
345.1391.7
(11.9%)(1.2%)
Gross Profit Margin32.3%32.9%(60) bps
32.9%35.6%
(270) bps(200) bps
Online sales as a % of sales10.7%30.0%(1,930) bps11.2%13.3%(218) bps(869) bps
694.8
988.6
738.5
1,069.8
630.7
1,099.3
764.7
1,048.5
Q1Q2
FY20FY21FY22FY23
-4.6%
Group Sales –Q1 and Q2 ($m)
+21.2%
40.0%
46.9%
22.5%
35.7%
36.3%
45.9%
21.8%
31.3%
The WarehouseWarehouse
Stationery
Noel LeemingTorpedo7
FY22 H1FY23 H1
Gross Profit Margin by BrandGroup Gross Profit Margin
32.5%
33.6%
36.2%
34.7%
32.7%
26.4%
27.1%
29.4%
28.9%
28.0%
FY19 H1FY20 H1FY21 H1FY22 H1FY23 H1
Group Gross Profit MarginGross Profit excl TWL
GROSS PROFIT MARGIN
22
•There has been some Gross Profit Margin decline across all brands, but overall Group decline is primarily due to The Warehouse impact.
•Increased sales in The Warehouse and Warehouse Stationery, at higher margins than other brands, have had a positive impact onGross Profit Margin in
terms of mix.
•The Warehouse was particularly impacted by its investment in MarketClubmembership growth and offers, and expansion in grocery which grew 34.0% in
the half year to make up 22.2% of The Warehouse sales.
•Poor weather has contributed to reduced seasonal sales requiring discounting to maintain aged inventory and provisions at similar levels.
Group Gross Profit Margin –by brand
FY22 H1 to FY23 H1
IMPACT ON GROSS PROFIT MARGIN
The Warehouse –Gross Profit Margin
FY22 H1 to FY23 H1
The Warehouse –Category sales movement year on year
Category sales as % of total salesFY23 H1 vs
FY22 H1
FY23 H1 vs
FY21 H1
FY23 H1FY22 H1FY21 H1
Grocery
1
22.2%18.8%18.6%34.0%25.3%
Home
20.0%20.1%20.0%12.3%4.5%
Apparel
12.8%12.8%11.9%13.4%12.9%
Other
45.0%48.3%49.5%6.1%-1.8%
Total Sales
100.0%100.0%100.0%13.2%4.8%
•The increase in MarketClubmemberships has been pleasing with now more than 1 million unique members across the Group. However, with
increased promotional spend and discounting during the period, there was a significant impact on overall The Warehouse gross profit margin.
•The growth in grocery saw sales grow 34.0% in the period, making up 22.2% of The Warehouse total sales and has lowered overall margin.
•Due to shipping delays and congestion, we experienced a container backlog when they reached our distribution centres –not beingable to process
these through distributions centres and return containers on time significantly increased container detention costs.
23
1.Grocery categories include pantry, confectionary and snacks, beverages, household consumables, health and beauty, and pet care.
Cost of doing business (“CODB”) increased in FY23 H1 due to:
•Marginal increase in employee expenses due to increased wage rates,
increased information systems labour driven by spending on key
projects, LTI and STI’s paid in the current period and not in prior year.
However employee expenses did decrease as a percentage of sales
compared to prior period.
•Increased depreciation and amortisation (excluding depreciation on right
of use assets) driven by increased capital expenditure.
•Other expenses increased due to increased information systems costs
as we progress through core system implementation, combined with
general inflationary pressures.
•On a percentage of sales basis, CODB decreased from 31.4% to 31.0%
in FY23 H1.
17.5%
16.8%
1.5%
1.7%
3.9%
3.8%
8.5%
8.7%
31.4%
31.0%
FY22 H1FY23 H1
Employee ExpenseDepn & Amortisation ExpenseLease ExpenseOther Expense
COST OF DOING BUSINESS
1.Cost of Doing Business is presented excluding the impact of NZ IFRS 16. FY22 H1 CODB
has been restated to include the impact of SaaS on CODB.
CODB
(1)
Movement ($m) –FY22 H1 to FY23 H1
CODB as % of sales
31.4%
31.0%
24
36.4
42.5
37.8
37.9
19.5
24.3
3.7
6.4
3.2
5.8
17.5
25.0
12.4
11.3
36.4
42.5
59.0
69.3
35.1
41.4
FY19FY20FY21FY22FY22 H1FY23 H1
Operating costsSaaS Expenses - RecurringSaaS Expenses - Project Cost
25
INFORMATION SYSTEMS AND DIGITAL COSTS
$million
Capex Spend
FY23 H1
Prepayments
FY23 H1
SaaS Adjustment
FY23 H1
Enterprise Resource Planning -Finance and
Inventory (ERPFI)
6.81.25.1
Group Order Management System (GOMS)2.52.20.3
Warehouse Management System (WMS)1.3--
Master Data Management (MDM)0.3-1.6
Human Capital Management0.30.30.7
ERP-T7--1.2
Total Core Systems Spend
11.23.78.9
Other IS and Digital capital expenditure
16.10.22.4
Total IS and Digital capital expenditure
27.33.911.3
1.FY19 and FY20 are not adjusted for the SaaS accounting policy change.
2.SaaS Expenses –Recurring include ongoing license and support costs.
24.6
32.6
29.4
45.2
19.4
27.3
3.6
8.1
4.5
3.9
FY19FY20FY21FY22FY22 H1FY23 H1
CapexPrepayments
Information Systems and Digital Capital Expenditure ($m)
1
Information Systems and Digital Operating Costs ($m)
1, 2
$ million
As at
Jan-2023
As at
Jan-2022
As at
July-2022
Jan-2023 vs
July-2022
Inventory
617.8 530.6 562.3 55.5
Trade and other receivables
112.7 98.7 99.5 13.2
Trade and other payables
(552.0)(600.2)(480.6)(71.4)
Provisions
(74.5)(76.5)(71.0)(3.5)
Working Capital
104.0 (47.4)110.2 (6.2)
Fixed Assets
334.1 262.7 303.3 30.8
Goodwill and Brands
73.0 73.0 73.0 -
Investment
3.5 4.2 3.8 (0.3)
Tax Assets
111.4 93.1 90.7 20.7
Derivatives
(22.3)31.5 28.8 (51.1)
Right of Use Assets
654.6 699.9 673.3 (18.7)
Capital Employed
1,258.31,117.01,283.1 (24.8)
Shareholders Equity
375.2 419.2 421.9 (46.7)
Minority Interests
0.8 (3.1)(0.8)1.6
Net Debt
83.4 (150.0)41.2 42.2
Lease Liabilities
798.9 850.9 820.8 (21.9)
Sources of Funds
1,258.31,117.01,283.1 (24.8)
Liquidity
381.6 480.0 378.8 (98.4)
26
•Working capital decreased compared to FY22 year end –the result of
increased inventory and trade receivables combined offset by a
greater increase in trade payables.
•The inventory balance was due to a combination of continued
normalisation of inventory levels post COVID-19 impacts, cost of
goods inflation, increased ordering to ensure availability over the peak
Q2 period, and a weaker than expected Christmas trading period.
•Fixed assets increased $30.8 million compared to FY22 year end,
reflecting the Group’s ongoing investment in core systems, digital
platforms, store refits, and SWAS implementations.
•Net debt increased by $42.2 million during the half year to $83.4
million, with the current elevated capital expenditure programme and
the FY22 final dividend paid during the half year not fully funded by
operating cash flow.
•Post balance sheet date and pre-31 January, an additional $80.2
million of creditors were paid.
•Committed bank facilities were $465 million at FY23 H1 (up from $420
million at FY22 year end), providing the Group with total liquidity of
$381.6 million at half year, and $301.4 million adjusted for pre 31
January creditor payments.
As at 29 January 2023
BALANCE SHEET
•Half year inventory balance was due to a combination of continued
normalisation of inventory levels post COVID-19 impacts, cost of
goods inflation, increased ordering to ensure availability over the peak
Q2 period, and a weaker than expected Christmas trading period.
•Goods in transit were $109.4 million at January 2023 compared to
$100.2 million at January 2022, reflecting the above trends.
•Forward purchases have been reduced as part of targeting lower year
end stock targets.
•As a result of increased inventory and less immediate sell through,
Group stockturn
2
decreased from 5.1 times in 12 months ended
January 2022 to 4.7 times in 12 months ended January 2023.
•Aged inventory
3
decreased from 17.7% of finished goods at FY22 year
end to 16.5% at the FY23 half year.
•Overall, inventory provisioning increased $4.2 million from FY22 year
end, increased from 3.6% of inventory at FY22 to 4.0% of finished
goods at FY23 H1.
1.The Warehouse and Warehouse Stationery are combined due to the one pool of stock initiative.
2.Stockturn is calculated over the last 12 months.
3.Aged inventory is stock on hand greater than 6 months as a percentage of finished goods (excluding
goods in transit).
INVENTORY MANAGEMENT
517.8
393.6
457.2
562.3
617.8
FY19FY20FY21FY22FY23 H1
Closing Inventory ($million)
4.1
8.1
2.8
4.2
6.7
2.0
The Warehouse and
Warehouse Stationery
Noel LeemingTorpedo7
FY22 H1FY23 H1
Stockturn by Brand (times)
1, 2
27
$ million
FY23 H1FY22 H1Variance
Trading EBITDA
1
130.6 152.4
(21.8)
Working Capital
3
20.7 41.7
(21.0)
Restructuring costs
(6.3)-
(6.3)
Taxes Paid
(17.2)(28.6)
11.4
Interest Paid (Lease interest)
2
(20.4)(18.5)
(1.9)
Other items
1.4 (2.3)
3.7
Operating Cash Flow
108.8 144.7
(35.9)
Capital Expenditure
(64.9)(40.8)
(24.1)
Lease principal repayments
(50.7)(48.7)
(2.0)
Purchase of Associate and Minority
(0.7)(4.8)
4.1
Dividends Received
0.1 0.2
(0.1)
Dividends Paid
(34.9)(61.0)
26.1
Other
0.1 (0.1)
0.2
Net Cash Flow
(42.2)(10.5)
(31.7)
Opening (Net Debt) / Net Cash
(41.2)160.5
(201.7)
Closing (Net Debt) / Net Cash
(83.4)150.0
(233.4)
1.Trading EBITDA represents Earnings before interest, taxation, unusual items, depreciation and amortisation.
2.Interest paid includes $17.8 million interest on lease liabilities (FY22 H1: $18.4 million) . Refer to Note 4 and
Note 14 of the Financial Statements for the six months ending 29 January 2023.
3.The change in working capital $6.2 million on slide 26 is adjusted for the movement in capital expenditure
creditors ($1.4 million) and includes the effect of fair value derivative hedges ($13.3 million).
28
•Operating cash flow decreased to $108.8 million in FY22 H1,
compared with $144.7 million last year due to reduced Trading
EBITDA, decreased working capital as a result of increased inventory
levels, and restructuring costs incurred in the half year.
•Capital expenditure increased significantly this year, as we continue to
invest in core systems, digital platforms, store refits, and Warehouse
Stationery SWAS implementations.
•Acquisitions in the half year relate to the Group’s purchase of the
remaining minority interest in TheMarket.com.
•Dividend paid relates to the final FY22 dividend of 10 cents per share.
CASH FLOW
For the six months ended 29 January 2023
•Capital expenditure increased from $40.5 million in FY22 H1 to $63.5
million in FY23 H1 as we increased investment in Core Systems, Digital
enablement and Store Development.
•Store Development includes the development of our garden centres
throughout The Warehouse stores and the integration of Warehouse
Stationery SWAS stores in Palmerston North, Timaru, Lower Hutt, and
Nelson.
•Other Information Systems investment include Continuous
Improvement projects in Business Operations, Productivity and
Development and Customer Engagement, and investment in
MarketClub.
•Core Systems capital expenditure (excluding SaaS) includes continued
investment in ERPFI, Group Order Management System (GOMS),
Warehouse Management System (WMS), and our new HR and People
platform, Human Capital Management (HCM).
•Digital and Customer capital expenditure includes the Group
Marketplace rollout across The Warehouse online platform and
development of TheMarket.com.
•Capital expenditure for the full year is expected to be $115 million to
$125 million continuing a significant multiyear investment in the
business. FY24 capital expenditure is expected to reduce to between
$60 million to $70 million.
27.1%
19.0%
18.2%
5.7%
5.7%
24.3%
Store DevelopmentOther Information Systems
Core SystemsDigital & Customer
Supply ChainOther
$63.5m
Capex Spend
CAPITAL EXPENDITURE
29
For the six months ended 29 January 2023
30
FY23 OUTLOOK
31
•We expect the remainder of FY23 to be challenging as our customers continue to face increased cost of living pressures and the
economic outlook remains unpredictable.
•The Group’s largest brand The Warehouse is trading well versus last year but our other brands’ financial performance remains
challenging.
•Initiatives are in place focussing on improving operational performance and reducing cost of doing business, working capital and
capital expenditure to increase total shareholder return.
•Although the outlook remains uncertain, the Group remains committed to completing existing major programmes of work to deliver
significant operational efficiencies and value for our customers.
FY23 OUTLOOK
31
•The Board has decided not to pay an interim dividend.There are several considerations in making
this decision
•The economic outlook is very challenging, and although the Group’s largest brand The
Warehouse is trading well, overall Group financial performance remains uncertain;
•Net debt at half year was $83.4 million.Creditor payments of $80.2 million were paid after
balance date before 31 January and including these, available liquidity at half year was
$301.4 million;
•The Group has an internal target liquidity range of $350 million -$450 million;
•Capital expenditure for the full year is expected to be $115 million to $125 million continuing
a significant multi-year investment in the business.FY24 capital expenditure is expected to
reduce to between $60 million to $70 million; and
•Inventory levels are higher than targeted and there are several initiatives to significantly
reduce this by year end.
•The Board has reserved the decision to pay a dividend on the full year result. Other initiatives are
already in train to move the Group’s liquidity back into the target range.
13.0
11.011.0
10.010.0
9.0
13.0
10.0
6.0
5.05.0
6.06.08.0
17.5
10.0
5.0
19.0
16.016.016.016.0
17.0
35.5
20.0
FY14FY15FY16FY17FY18FY19FY20FY21FY22
InterimFinalSpecial
32
DIVIDENDS
32
33
•The first half of the year was challenging and we
are responding with clear action.
•The decisions we have made and the actions we
are taking will put us in good stead to manage
future trading and economic unpredictability.
•We are committed to increasing valuefor our
customers and our shareholders and helping Kiwis
live better every day.
CLOSING COMMENTS
THANK YOU
APPENDIX A
35
DIVISIONAL RESULTS
55.9%
6.8%
30.7%
5.3%
1.3%
(1)
FY23 H1 Group Sales
$1,813.2m
1.Other sales (1.3%) includes sales through 1-day.co.nz, revenue from TheMarket.com (excluding gross transaction
value(GTV)), and other Group operations and eliminations.
2.Operating Profit includes the impact of SaaS but excludes the impact of NZ IFRS16 and is a non-GAAP measure,
refer to Note 4 of the Financial Statements for a reconciliation between Operating Profit and Reported EBIT.
3.Other items in operating profit include corporate costs and other unallocated overheads.
Divisional Summary
$96.4m
$1,013.7m
$556.7
$124.1m
13.2%1.7%4.5%1.1%
FY23 H1 Operating Profit
(2)
($million)
Other
(3)
TOTAL
GROUP
36
For the six months ended 29 January 2023
•Sales in FY23 H1 were up 13.2% against the prior period due to the COVID-19
lockdown last year, which included Auckland stores being unable to trade for 84
days.After a very strong first quarter which saw sales increase 39.0%, we saw
softer trading in the second quarter with sales up marginally at 0.3%.
•Store foot traffic in FY23 was up 29.6%, however decreases in average basket
value and conversion impacted total sales.
•Online sales declined 39.0% from FY22, when extended lockdowns saw record-
high online sales.
•Most categories have seen increases in sales from last year, however we saw
declines in Sporting and Outdoor Furniture, with the wet summer in the North
Island a contributory factor.
•Overall Grocery sales have increased 34.0% on last year, as we continue to
expand the range in Pantry and Chilled with sales in this area up 155.2% YoY.
•Gross Profit Margin declined 370 bps due to category mix of sales including
increased grocery sales and increased container detention costs. Margin was
also impacted by increased promotional activity including purposeful investment
in the Group’s MarketClubmembership programme, which now has more than
1 million unique members across the Group.
•CODB decreased from prior year, with reduced store and fulfilmentcentre
labour cost savings offset by increased support office overheads and higher
occupancy costs due to the increase inCPI. While we have been able to offset
wage rates and inflation pressures in recent years, these efficiencies are
decreasing.
•The Warehouse Mosgiel closed in FY22 H2 and South City closed in FY23 H1,
bringing the total number of The Warehouse stores to 88.
$millionFY23 H1FY22 H1Variance
Sales
1,013.7 895.4
13.2%
Gross Profit
368.3 358.1
2.8%
Gross Profit Margin36.3%40.0%(370) bps
Cost of doing business (CODB)
327.0 320.8
(1.9%)
CODB %32.2%35.8%(360) bps
Operating Profit
41.337.3
10.7%
Operating Profit Margin %4.1%4.2%(10) bps
Online sales
72.6119.0
(39.0%)
Online as a % of sales
7.2%13.3%
(613) bps
Click and Collect as a % of online sales
48.8%47.3%
+145 bps
Number of stores
8890
(2)
1. Calculated based on unrounded % numbers.
37
•Sales were up 1.7% on the prior period (up 18.0% in Q1 and down 8.9% in
Q2), with transactions up 17% and foot traffic up 19% in stores.
•Store sales were up 11.8% on the prior period due to the impacts of COVID-19
lockdown, however online sales were down 45.9%.
•Gross Profit decreased by 0.4% to $57.0 million, through change in sales mix
with lower proportion of Office Furniture sales and lower branded product
rebates in Technology, resulting in a 100bps decline in Gross Profit Margin.
•Print & Copy centre and Stationery sales have increased significantly on the
COVID-19 impacted last year. Communicationshave also seen an increase
however Computer and Office Furniture sales have declined where prior year
demand for working from home set up has reduced.
•Wellington and Penrose stores were closed in FY22 H2 and the Auckland
CBD store was closed in FY23 H1.
•A total of 4 SWAS integrations were implemented in FY23 H1 –Nelson, Lower
Hutt, Palmerston North and Timaru –bringing the total to 39 (up from 35 at
FY22 year end).
$ millionFY23 H1FY22 H1Variance
Sales
124.1 122.0
1.7%
Gross Profit
57.0 57.2
(0.4%)
Gross Profit Margin45.9%46.9%(100) bps
Cost of doing business (CODB)
48.1 47.5
1.1%
CODB %38.7%39.0%(30) bps
Operating Profit
8.9 9.7
(8.0%)
Operating Profit Margin %7.2%7.9%(70) bps
Online sales
11.521.3
(45.9%)
Online as a % of sales
9.3%17.5%
(819 bps)
Click and Collect as a % of online sales
19.3%29.8%
(1,049 bps)
Number of stores
6770
(3)
SWAS Stores
3927
12
For the six months ended 29 January 2023
1. Calculated based on unrounded % numbers.
38
$millionFY23 H1FY22 H1Variance
Sales
556.7 582.7
(4.5%)
Gross Profit
121.1 130.9
(7.5%)
Gross Profit Margin21.8%22.5%(70) bps
Cost of doing business (CODB)
103.9 101.5
2.4%
CODB %18.7%17.5%+120 bps
Operating Profit
17.2 29.4
(41.4%)
Operating Profit Margin %3.1%5.0%(190) bps
Online sales
66.8124.2
(46.2%)
Online as a % of sales
12.0%21.3%
(932 bps)
Click and Collect as a % of online sales
60.3%56.9%
+345 bps
Number of stores
6871
(3)
•Sales were down on the prior period as the cost of living crisis engulfed New
Zealand. Whilst there was a modest improvement in FY23 Q1 with sales up
3.3% as we cycled against a lockdown period, FY23 Q2 bore the brunt of the
decline in consumer spending, with sales 9.9% down on the prior period.
•The online channel penetration returned to normal levels, making up 12.0% of
total sales. The unusually high penetration rate during FY22 Q1 was driven by
the lockdown. Click & collect remained our customers’ most popular fulfilment
option, accounting for 60.3% of online sales fulfilment.
•TWG Business sales in Noel Leeming saw a decrease in FY23 H1 due to
significant pressure in the building and trade sector –our largest TWGB
category –compared to last year. Education and Government transactions
were also down on prior year as these sectors also reign in their spending.
•Softer demand impacted sales across most product categories as customers
decreased their spending on big ticket items, combined with higher sales on
tech items in prior year due to COVID-19 lockdown demands. Due to better
availability in FY23 H1, we did see growth in Smart Home, Whiteware, Gaming
and Cellular.
•Gross Profit Margin fell 70 bps as a result of competitive trading and product
mix during FY23 Q2.
•Since FY22 H1, we closed Noel Leeming St LukesWestfield, Queen Street
Auckland and the Glenfield Clearance Centre.
For the six months ended 29 January 2023
1. Calculated based on unrounded % numbers.
39
$millionFY23 H1FY22 H1Variance
Sales
96.4 97.5
(1.1%)
Gross Profit
30.2 34.8
(13.1%)
Gross Profit Margin31.3%35.7%(440) bps
Cost of doing business (CODB)
36.7 33.3
10.6%
CODB %38.1%34.1%+400 bps
Operating (Loss)/Profit
(6.5)1.5
(527.7%)
Operating (Loss)/Profit Margin %(6.8%)1.6%(840) bps
Online sales
26.438.3
(31.2%)
Online as a % of sales
27.3%39.3%
(1,198) bps
Click and Collect as a % of online sales
52.0%48.3%
+377 bps
Number of stores
2522
3
For the six months ended 29 January 2023
1. Calculated based on unrounded % numbers.
•Sales were down by 1.1% which was impacted by the lockdown in Q1and
strong consumer demand for outdoor adventure goods in Q2 last year. In H1
FY23, we have seen Sales impacted by softening consumer sentiment
ondiscretionary spend and a wet Summer in the North Island.Q1 Sales
wereup9.4% andQ2 down 6.8%.
•Store sales were up 18.3%, driven by new store openings and more
customers returning to stores.
•Online sales decreased 31.2% as the lockdown drove elevated online sales
last year. Click & Collect have remained a popular option for customers,
accounting for 52.0% of online sales fulfilment, up 375bps.
•Gross profit margin declined by 440 bps driven by aggressive market
conditions as competitors exit overstock, particularly in the bike category.
•After several strong years during New Zealand COVID-19 lockdown periods,
we have seen softer demand across Bike and Fitness categories in FY23 H1,
consistent with declining trends in these sales globally.
•CODB up $3.4 million on the prior year driven by a larger store network,
investment in the change management of a new ERP going live in 2023 and
investment in headcount to help deliver a higher private label sales mix.
•The number of Torpedo7 stores has increased to 25with new store openings
in Whangarei, Petone and Botany in the last 12 months.
40
APPENDIX B
41
ADDITIONAL INFORMATION
NEW ZEALAND CONSUMER INSIGHTS
1.Total Retail Spend includes all retail spend. Source: Datamine, TWG Insights.
2.Core Retail Spend includes Clothing and Footwear, Department Stores, Furniture, Appliance and Homeware, Health Goods
and Services, Home Building, Books and Stationery. Source: Datamine, TWG Insights.
3.Source: Tradingeconomics.com.
4.Source: Reserve Bank of New Zealand.
5.Source: Statistics New Zealand.
42
Total NZ
Retail Spend
1
Grew 20% to $38.8bn in
FY23 H1 driven by
demand for experiences
(Travel +208% and
Hospitality +43%) and
essentials (Fuel +21%
and Groceries +4%).
Core Retail
Spend
2
Grew 10.8% to $11.2bn
in FY23 H1 driven by
Clothing & Footwear
(+21%), Department
Stores (+17%) and
Health Goods and
Services (+23%).
Market Share
The Warehouse market
share grew +0.2% vs
Core Retail for the six
months ending Jan
2023 vs Jan 2022.
Consumer
Confidence
Consumer confidence
index decreased from
83.4pts to 79.8pts
(vs expected 86.0pts)
3
.
GDP decreased 0.6pts
in Q4 Dec 2022
3
.
Cost of Living
Inflation rate of 7.2%
YoY in Q4 Dec 2022
3
.
Interest rate (OCR)
increased to 4.75% in
Jan 2023 –the highest
since 2008
4
.
Annual wage inflation
rate of 4.1% as of
December 2022
5
.
Q1 Core Retail:
Grew 43% YoY with
all retail sectors up.
Q2 Core Retail:
Declined 7% YoY with
4 out of 6 retail
sectors down.
EBITNPAT
$ million
FY23 H1FY22 H1FY23 H1FY22 H1
Adjusted Earnings
1, 2
30.9 57.2 19.6 42.0
Restructuring costs
(6.3)-(4.5)-
NZ IFRS16
3
(see below)
20.9 21.8 2.3 2.4
Reported earnings
45.5 79.0 17.4 44.4
1.FY22 H1 has been restated to include the change in how the Group accounts for Cloud Computing Arrangements (Software as a Service, “SaaS Adjustment”).
2.To improve the understanding of underlying business performance, the Group adjusts profit for unusual and non-trading items. Unusual items include profits from the sale of assets and losses associated with
adjustments in carrying value of assets, M&A activity, restructuring costs and the non-cash impact of applying the NZIFRS 16 lease accounting standard.
3.The NZ IFRS16 adjustment of $20.9m in FY23 H1 (FY22 H1: $21.8m) represents the difference between the depreciation on Right-of-use-Assets and old NZGAAP rent expense.
4.Adjusted Net Profit After Tax (NPAT) is before unusual itemsand is a non-GAAP measure.A reconciliation between Adjusted and Statutory NPAT can also be found inNote 5 of the Financial Statements for
the six months ended 29 January 2023.
ADJUSTED & REPORTED EARNINGS
43
Adjusted Earnings
•FY22 H1 has been restated to include the change of how the
Group accounts for SaaS, resulting in an EBIT reduction of
$8.3 million in FY22 H1. FY23 H1 estimated EBIT reduction is
$4.2 million.
•Restructure initiatives resulted in an impairment expense for
redundant assets including 1-day operations, and a provision
for staff redundancy expenses connected with the restructure.
Additional restructuring costs are expected to be incurred in
FY23 H2.
•Adjusted Earnings are reported excluding the impact of NZ
IFRS16, which had a impact of $20.9 million in FY23 H1
compared to $21.8 million in FY22 H1 at an EBIT level.
For the six months ended 29 January 2023
EBIT
Adjustment for NZ IFRS16
FY23 H1FY22 H1
Pre-NZ IFRS16 rent
68.466.6
Right of use asset amortisation
(47.8)(47.2)
Gain on lease terminations
0.32.3
NZ IFRS16 impact on EBIT
20.921.8
Reconciliation of NZ IFRS16 Adjustment
TermDefinitionTermDefinition
C&CClick & CollectMDMMaster Data Management
CODBCost of Doing BusinessNIDCNorth Island Distribution Centre
COGSCost of Goods SoldNIFCNorth Island Fulfilment Centre
DCDistribution CentreNLNoel Leeming
DIFOTDelivered In-Full On-TimeOMSOrder Management Solution
E2EEnd-to-EndOMUOperating Model Update
EDLPEvery Day Low PricePOSPoint-of-Sale
ELSExecutive Leadership SquadSIDCSouth Island Distribution Centre
eNPSEmployee Net Promotor ScoreSSOStore Support Office
ERPFIEnterprise Resource Planning -Finance and InventorySSSSame Store Sales
FCFulfilment CentreSWASStore-Within-a-Store
GBOGroup Business OperationsT7Torpedo7
GEPGroup eCommerce PlatformTWLThe Warehouse
GTVGross Transaction ValueWALTWeighted Average Lease Tenure
GOMSGroup Order Management System WMSWarehouse Management System
LTVCustomer Lifetime ValueWSWarehouse Stationery
GLOSSARY
44
This presentation may contain forward looking statements and projections.
There can be no certainty of the outcome and projections involve known
and unknown risks, uncertainties, assumptions and other important factors
that could cause the actual outcomes to be materially different from the
events or results expressed or implied by such statements and projections.
While all reasonable care has been taken in the preparation of this
presentation, The Warehouse Group Limited does not make any
representation, assurance or guarantees as to the accuracy or
completeness of any information in this presentation. The forward-looking
statements and projections in this report reflect views held at the date of
this presentation.
Except as required by applicable law or any applicable Listing Rules, the
Relevant Persons disclaim any obligation or undertaking to update any
information in this presentation.
A number of non-GAAP financial measures are used in this presentation.
You should not consider any of these in isolation from, or as a substitute for,
the information provided in the interim financial statements, which are
available at www.thewarehousegroup.co.nz.
This presentation does not constitute investment advice, or an inducement,
recommendation or offer to buy or sell any securities in The Warehouse
Group Limited.
45
DISCLAIMER
---
For and on behalf of the Board
Joan WithersDean Hamilton
ChairChair of the Audit and Risk Committee
22 March 2023
The Warehouse Group Limited
For the 26 weeks ended 29 January 2023
Interim Financial Statements
Consolidated Income Statement
Unaudited Unaudited Audited
26 Weeks 26 Weeks 52 Weeks
Ended Ended Ended
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Retail sales
4
1,813,187 1,729,984 3,294,332
Cost of retail goods sold(1,220,832)(1,130,424)(2,129,950)
Gross profit592,355 599,560 1,164,382
Other income3,071 3,624 7,683
Employee expenses(304,652)(303,375)(575,361)
Depreciation and amortisation expenses
4
(78,793)(73,452)(146,122)
Other operating expenses(160,158)(147,399)(291,812)
Operating profit
4
51,823 78,958 158,770
Unusual items
5
(6,275)- -
Earnings before interest and tax45,548 78,958 158,770
Net interest expense(20,833)(18,457)(36,831)
Profit before tax24,715 60,501 121,939
Income tax expense(7,388)(17,317)(34,851)
Net profit for the period17,327 43,184 87,088
Attributable to:
Shareholders of the parent17,363 44,438 89,311
Minority interests(36)(1,254)(2,223)
17,327 43,184 87,088
Earnings per share attributable to shareholders of the parent:
Basic earnings per share5.0 cents 12.9 cents 25.9 cents
Diluted earnings per share5.0 cents 12.9 cents 25.9 cents
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
26 Weeks 26 Weeks 52 Weeks
Ended Ended Ended
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Net profit for the period17,327 43,184 87,088
Items that may be reclassified subsequently to the Income Statement
Movement in foreign currency translation reserve(257)383 294
Movement in hedge reserves (net of tax)(27,337)9,174 6,389
Total comprehensive income for the period(10,267)52,741 93,771
Attributable to:
Shareholders of the parent
(10,231)53,995 95,994
Minority interest(36)(1,254)(2,223)
Total comprehensive income(10,267)52,741 93,771
2
Consolidated Balance Sheet
Unaudited Unaudited Audited
As at As at As at
29 January 30 January 31 July
Note
2023 2022 2022
ASSETS
$ 000 $ 000 $ 000
Current assets
Cash and cash equivalents
15
32,774 149,966 24,999
Trade and other receivables
8
98,097 89,586 87,853
Inventories
7
617,756 530,615 562,313
Derivative financial instruments
16
3,962 31,536 29,491
Taxation receivable3,624 1,053 1,505
Total current assets756,213 802,756 706,161
Non-current assets
Trade and other receivables
8
14,591 9,154 11,664
Property, plant and equipment
11
240,942 199,019 224,355
Intangible assets
12
166,108 136,666 151,825
Right of use assets
13
654,619 699,852 673,278
Investment in associate3,520 4,176 3,839
Deferred taxation107,821 92,077 89,227
Total non current assets1,187,601 1,140,944 1,154,188
Total assets1,943,814 1,943,700 1,860,349
LIABILITIES
Current liabilities
Borrowings
15
116,200 - 66,150
Trade and other payables
9
551,964 600,310 480,596
Derivative financial instruments
16
25,704 - 668
Lease liabilities
14
96,306 96,782 95,849
Provisions
10
53,044 55,457 49,831
Total current liabilities843,218 752,549 693,094
Non current liabilities
Derivative financial instruments
16
653 - -
Lease liabilities
14
702,636 754,144 724,991
Provisions
10
21,408 21,010 21,165
Total non current liabilities724,697 775,154 746,156
Total liabilities1,567,915 1,527,703 1,439,250
Net assets375,899 415,997 421,099
EQUITY
Contributed equity360,235 360,235 360,235
Reserves(14,502)15,613 12,739
Retained earnings29,379 43,240 48,940
Total equity attributable to shareholders375,112 419,088 421,914
Minority interest787 (3,091)(815)
Total equity375,899 415,997 421,099
3
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
26 Weeks 26 Weeks 52 Weeks
Ended Ended Ended
29 January 30 January 31 July
Note
2023 2022 2022
Cash flows from operating activities
$ 000 $ 000 $ 000
Cash received from customers1,814,177 1,727,132 3,304,417
Payments to suppliers and employees(1,667,651)(1,535,364)(3,119,707)
Income tax paid(17,248)(28,598)(42,514)
Interest paid(20,448)(18,519)(36,773)
Net cash flows from operating activities108,830 144,651 105,423
Cash flows from investing activities
Proceeds from sale of property, plant and equipment- - 456
Purchase of property, plant, equipment and software(64,882)(40,808)(107,469)
Purchase of associate- (4,500)(4,500)
Purchase of minority interest
3
(691)(333)(1,716)
Net cash flows from investing activities(65,573)(45,641)(113,229)
Cash flows from financing activities
Proceeds from borrowings50,050 - 66,150
Lease principal repayments(50,714)(48,655)(98,264)
Treasury stock dividends received 139 243 381
Dividends paid to parent shareholders(34,907)(61,032)(95,863)
Dividends paid to minority shareholders(50)(126)(125)
Net cash flows from financing activities(35,482)(109,570)(127,721)
Net cash flow7,775 (10,560)(135,527)
Opening cash position24,999 160,526 160,526
Closing cash position32,774 149,966 24,999
Reconciliation of Operating Cash Flows
Profit after tax17,327 43,184 87,088
Non-cash items
Depreciation and amortisation expenses
4
78,793 73,452 146,122
Share based payment expense353 - -
Property, plant and equipment impairment1,378 - -
COVID-19 landlord rent relief
14
- (812)(1,775)
Movement in deferred tax(7,965)316 4,239
Total non-cash items72,559 72,956 148,586
Items classified as investing or financing activities
Net loss on disposal of property, plant and equipment206 440 1,128
Loss from investment in associate319 324 661
Gain on lease terminations
4
(335)(2,327)(2,681)
Supplementary dividend tax credit223 334 481
Total investing and financing adjustments413 (1,229)(411)
Changes in assets and liabilities
Trade and other receivables
(13,171)(14,786)(15,564)
Inventories(55,443)(73,464)(105,162)
Trade and other payables85,808 151,340 30,159
Provisions3,456 (21,419)(26,890)
Income tax(2,119)(11,931)(12,383)
Total changes in assets and liabilities18,531 29,740 (129,840)
Net cash flows from operating activities108,830 144,651 105,423
4
Consolidated Statement of Changes in Equity
Foreign Employee
Currency Share
Share Treasury Hedge Translation BenefitsRetained Minority Total
(Unaudited)
Capital Stock Reserves Reserve Reserve Earnings Interest Equity
For the 26 weeks ended 29 January 2023
$ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000
Balance at the beginning of the period365,517 (5,282)12,560 179 - 48,940 (815)421,099
Profit for the half year- - - - - 17,363 (36)17,327
Movement in foreign currency translation reserve- - - (257)- - - (257)
Movement in derivative cash flow hedges- - (37,968)- - - - (37,968)
Tax related to movement in hedge reserve- - 10,631 - - - - 10,631
Total comprehensive income- - (27,337)(257)- 17,363 (36)(10,267)
Share rights charged to the income statement- - - - 353 - - 353
Minority put option exercised- - - - - (2,379)1,688 (691)
Dividends paid- - - - - (34,684)(50)(34,734)
Treasury stock dividends received- - - - - 139 - 139
Balance at the end of the period365,517 (5,282)(14,777)(78)353 29,379 787 375,899
Foreign Employee
Currency Share
Share Treasury Hedge Translation BenefitsRetained Minority Total
(Unaudited)
Capital Stock Reserves Reserve Reserve Earnings Interest Equity
For the 26 weeks ended 30 January 2022
$ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000
Balance at the beginning of the period365,517 (5,282)6,171 (115)- 60,573 (2,694)424,170
Profit for the half year- - - - - 44,438 (1,254)43,184
Movement in foreign currency translation reserve- - - 383 - - - 383
Movement in cash flow and monetised hedges- - 12,741 - - - - 12,741
Tax related to movement in hedge reserve- - (3,567)- - - - (3,567)
Total comprehensive income- - 9,174 383 - 44,438 (1,254)52,741
Minority put options exercised- - - - - (1,316)983 (333)
Dividends paid- - - - - (60,698)(126)(60,824)
Treasury stock dividends received- - - - - 243 - 243
Balance at the end of the period365,517 (5,282)15,345 268 - 43,240 (3,091)415,997
Foreign Employee
Currency Share
Share Treasury Hedge Translation BenefitsRetained Minority Total
(Audited)
Capital Stock Reserves Reserve Reserve Earnings Interest Equity
For the 52 weeks ended 31 July 2022
$ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000
Balance at the beginning of the period365,517 (5,282)6,171 (115)- 60,573 (2,694)424,170
Profit for the year- - - - - 89,311 (2,223)87,088
Movement in foreign currency translation reserve- - - 294 - - - 294
Movement in derivative cash flow hedges- - 8,873 - - - - 8,873
Tax related to movement in hedge reserve- - (2,484)- - - - (2,484)
Total comprehensive income- - 6,389 294 - 89,311 (2,223)93,771
Minority put options exercised- - - - - (5,943)4,227 (1,716)
Dividends paid- - - - - (95,382)(125)(95,507)
Treasury stock dividends received- - - - - 381 - 381
Balance at the end of the period365,517 (5,282)12,560 179 - 48,940 (815)421,099
5
Notes to the Interim Financial Statements
1. GENERAL INFORMATION
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3. SIGNIFICANT TRANSACTIONS AND EVENTS IN THE PERIOD
The interim financial statements of the Group have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand
(GAAP). They comply with New Zealand Equivalent to the International Accounting Standard 34 Interim Financial Reporting(NZIAS 34) and
International Accounting Standard 34 Interim Financial Reporting(IAS 34) and consequently, do not include all the information required for full
financial statements. These Group interim financial statements should be read in conjunction with the annual report for the 52 weeks ended 31 July
2022.
These interim financial statements have been prepared under the historical cost convention except for the revaluation of certain financial
instruments (including derivative instruments). The reporting currency used in the preparation of the interim financial statements is New Zealand
dollars, rounded to the nearest thousands unless otherwise stated.
Accounting standards
The accounting policies that materially affect the measurement of the interim financial statements have been applied on a consistent basis with
those used in the audited financial statements for the 52 weeks ended 31 July 2022. Certain comparative amounts reported for the previous half
year have been restated following adoption of the Cloud Computing Arrangement agenda decision issued by the International Financial Reporting
Standards Interpretations Committee (IFRIC) in April 2021. Information relating to these adjustments were detailed in note 17 of the July 2022
annual financial statements.
Non-GAAP financial information
The Group uses operating profit, earnings before tax and interest, unusual items and adjusted net profit to describe financial performance as it
considers these line items provide a better measure of underlying business performance. These non-GAAP measures are not prepared in
accordance with New Zealand Equivalent to International Financial Reporting Standards (NZIFRS) and may not be comparable to similarly titled
amounts reported by other companies. The Group’s policy regarding unusual items and adjusted net profit are detailed in note 5.0.
Critical accounting judgements, estimates and assumptions
The preparation of the interim 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 half year. The same significant
judgements, estimates and assumptions that are summarised in the audited financial statements for the 52 weeks ended 31 July 2022 were applied
in the preparation of these interim financial statements.
Approval of Interim Financial Statements
These consolidated interim financial statements were approved for issue by the Board of Directors on 22 March 2023. Unless as otherwise stated,
the interim financial statements have been reviewed by our Auditors, but are not audited.
The Warehouse Group Limited (the Company) and its subsidiaries (together the Group) trade in the New Zealand retail sector. 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).
Group structure
At the commencement of the financial year the Group legally amalgamated Noel Leeming Group Limited with The Warehouse Limited. This
amalgamation was designed to simplify processes by merging the support office functions and combining the balance sheet management of both
operations. The amalgamation did not result in any significant changes to the store operations or branding. In August 2022 the Group also acquired
the remaining 3% minority interest in TheMarket.com for a consideration of $0.7 million.
Restructure (note 5)
In December 2022 the Group looked at ways to lower costs in response to a decline in profitability due to customers cutting back their spending
caused by higher living costs and a deteriorating economy. A plan was made to reduce spending, postpone some key projects and pause
recruitment. The plan included the integration of TheMarket.com into the Group's Agile structure and closing the 1-day operations. The plan has
resulted in an impairment expense for redundant assets (note 11) connected with the 1-day operations and a provision for staff redundancy
expenses connected with the restructure. The Group also impaired inventory in 1-day to recognise the clearance activity required to dispose of its
inventory holdings. Additional restructuring costs are expected to be incurred during the second half of the year as the Group broadened the scope
of the initial proposal after balance date with the prospect of further costs being incurred.
Auckland floods (January 2023) and Cyclone Gabrielle (February 2023)
The Auckland floods which occurred 2 days before balance date were followed by Cyclone Gabrielle within a fortnight. These two closely timed
severe weather events caused unprecedented flooding and damage across parts of the North Island. Although many of the Group’s team members
in the Hawkes Bay, Coromandel and parts of Auckland were impacted by the severe weather events the Group was fortunate that its store network
did not suffer any significant physical damage. Our team members worked quickly to reset our impacted stores to ensure they remained open. In
some of the impacted regions, customer and supply access to stores has been difficult, despite these challenges there has not been a material
impact on the store network profits.
6
Notes to the Interim Financial Statements - continued
4. SEGMENT INFORMATION
(Unaudited)(Unaudited)(Audited)(Unaudited)(Unaudited)(Audited)
26 Weeks 26 Weeks 52 Weeks 26 Weeks 26 Weeks 52 Weeks
Ended Ended Ended Ended Ended Ended
29 January 30 January 31 July 29 January 30 January 31 July
Note
2023 2022 2022 2023 2022 2022
$ 000 $ 000 $ 000 $ 000 $ 000 $ 000
The Warehouse1,013,655 895,413 1,726,936 41,262 37,285 75,742
Warehouse Stationery 124,141 122,047 249,749 8,904 9,680 23,058
Warehouse segment1,137,796 1,017,460 1,976,685 50,166 46,965 98,800
Noel Leeming 556,742 582,746 1,096,744 17,248 29,427 53,907
Torpedo796,395 97,462 171,474 (6,531)1,527 (2,240)
TheMarket.com21,869 33,037 49,954 (16,028)(11,985)(24,734)
Other Group operations4,083 3,586 6,866 (13,989)(8,734)(8,961)
Inter-segment eliminations(3,698)(4,307)(7,391)
Group1,813,187 1,729,984 3,294,332 30,866 57,200 116,772
Adjustment for NZIFRS 16 (Leases)20,957 21,758 41,998
Operating profit51,823 78,958 158,770
Unusual items
5
(6,275)- -
Earnings before interest and tax45,548 78,958 158,770
Operating margin
The Warehouse (%)
4.1 4.2 4.4
Warehouse Stationery (%)7.2 7.9 9.2
Noel Leeming (%)3.1 5.0 4.9
Torpedo7 (%)(6.8)1.6 (1.3)
Total Retail Group (%)1.7 3.3 3.5
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Pre NZIFRS 16 Rent68,432 66,632 133,931
Right of use asset amortisation(47,810)(47,201)(94,614)
Gain on lease terminations335 2,327 2,681
Impact on operating profit20,957 21,758 41,998
Lease liability interest
14
(17,751)(18,413)(36,683)
Impact on net profit before tax
5
3,206 3,345 5,315
Depreciation and amortisation expenses
Property, plant, equipment and software
11
30,983 26,251 51,508
Right of use assets
13
47,810 47,201 94,614
Total depreciation and amortisation expenses78,793 73,452 146,122
Operating performance
REVENUEOPERATING PROFIT
Adjustment for NZIFRS 16 (Leases)
Operating segments
The Group has four operating segments trading in the New Zealand retail sector and an online marketplace (includes 1-day). These segments form
the basis of internal reporting used by senior management and the Board of Directors to monitor and assess performance and assist with strategy
decisions. The Group has disclosed its segment operating profit performance that excludes the impacts of NZIFRS 16 Leases, which is consistent
with internal reporting and the way the Group monitors financial performance. Assets are not allocated to operating segments and the balance sheet
is managed and internally reported on a consolidated basis to the senior management and the Board of Directors.
Each of the four main retail segments represent a distinct retail brand that operate throughout New Zealand. Customers can purchase product from
the retail chains either online or through the Group’s physical retail store network. At period end the Group’s physical store network consists of 88 The
Warehouse stores, 67 Warehouse Stationery stores (including 39 stores trading within The Warehouse stores), 68 Noel Leeming stores and 25
Torpedo7 stores. The Warehouse predominantly sells general merchandise and apparel, Noel Leeming sells technology and appliance products,
Torpedo7 sells outdoor and sporting equipment and Warehouse Stationery sells stationery products.
Other Group operations include a property company, a chocolate factory and the residual cost of unallocated support office functions.
7
Notes to the Interim Financial Statements - continued
5. ADJUSTED NET PROFIT
(Unaudited)(Unaudited)(Audited)
26 Weeks 26 Weeks 52 Weeks
Ended Ended Ended
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Adjusted net profit19,573 42,030 85,484
Less:
Restructuring costs
3
(6,275)- -
Adjustment for NZIFRS 16 (Leases)
4
3,206 3,345 5,315
Income tax relating to above items859 (937)(1,488)
Net profit attributable to shareholders of the parent17,363 44,438 89,311
6. DIVIDENDS
(Unaudited)(Unaudited)(Audited)(Unaudited)(Unaudited)(Audited)
26 Weeks 26 Weeks 52 Weeks 26 Weeks 26 Weeks 52 Weeks
Ended Ended Ended Ended Ended Ended
29 January 30 January 31 July 29 January 30 January 31 July
2023 2022 2022 2023 2022 2022
$ 000 $ 000 $ 000
Prior year final dividend10.0 17.5 17.5 34,684 60,698 60,698
Interim dividend- - 10.0 - - 34,684
Total dividends paid10.0 17.5 27.5 34,684 60,698 95,382
7. INVENTORIES
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Finished goods529,803 449,569 485,486
Inventory provisions(21,442)(19,185)(17,244)
Retail stock508,361 430,384 468,242
Goods in transit from overseas109,395 100,231 94,071
Inventory617,756 530,615 562,313
8. TRADE AND OTHER RECEIVABLES
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Trade receivables36,562 39,313 35,526
Prepayments43,322 24,607 34,256
Rebate accruals and other debtors32,804 34,820 29,735
112,688 98,740 99,517
Less non current prepayments(14,591)(9,154)(11,664)
Total trade and other receivables98,097 89,586 87,853
Inventories
Trade and other receivables
Adjusted net profit reconciliation
CENTS PER SHAREDIVIDENDS PAID
Dividends paid
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 a better measure of underlying business performance. 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 gains or losses
from property disposals, goodwill and brand impairment, costs relating to business acquisitions or disposals, ineffective hedge derivatives and costs
connected with restructuring the Group. Following the adoption of NZIFRS 16 the non-cash impact relating to the lease accounting standard are
also excluded from adjusted net profit.
8
Notes to the Interim Financial Statements - continued
9. TRADE AND OTHER PAYABLES
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Local trade creditors and accruals304,654 353,832 280,208
Foreign currency trade creditors122,529 113,332 113,722
Goods in transit creditors33,311 76,195 32,684
Capital expenditure creditors1,579 2,728 2,995
Goods and services tax42,721 7,884 7,475
Reward schemes, lay-bys, Christmas club deposits and gift vouchers24,575 23,353 22,692
Payroll accruals22,595 22,986 20,820
Total trade and other payables551,964 600,310 480,596
10. PROVISIONS
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Current liabilities53,044 55,457 49,831
Non current liabilities21,408 21,010 21,165
Total provisions74,452 76,467 70,996
Provisions consist of:
Employee entitlements61,373 62,305 57,628
Make good provision8,124 8,704 8,502
Sales returns provision4,955 5,458 4,866
Total provisions74,452 76,467 70,996
11. PROPERTY, PLANT, EQUIPMENT AND COMPUTER SOFTWARE
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Property, plant and equipment240,942 199,019 224,355
Computer software
12
93,152 63,710 78,869
Carrying amount334,094 262,729 303,224
Movement in property, plant, equipment and software
Carrying amount at the beginning of the period
303,224 248,842 248,842
Capital expenditure63,467 40,518 107,446
Depreciation and amortisation
4
(30,983)(26,251)(51,508)
Impairment
3
(1,378)- -
Disposals(236)(380)(1,556)
Carrying amount at the end of the period334,094 262,729 303,224
12. INTANGIBLE ASSETS
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Computer software
11
93,152 63,710 78,869
Brands15,500 15,500 15,500
Goodwill57,456 57,456 57,456
Net book value166,108 136,666 151,825
Trade and other payables
Provisions
Intangible assets
Property, plant, equipment and computer software
The Group performs a detailed impairment assessment of intangible assets prior to the end of each financial year and at each interim reporting date
considers if there are any indicators of impairment which could have a bearing on the impairment assessments. The Group’s review did not identify
any significant indicators of impairment in respect of the cash generating units connected with the Group’s material intangible assets.
9
Notes to the Interim Financial Statements - continued
13. RIGHT OF USE ASSETS
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Movement in right of use assets
Carrying amount at the beginning of the period673,278 736,524 736,524
Foreign exchange movement(86)- 73
Additions
14
29,937 11,621 34,092
Depreciation
4
(47,810)(47,201)(94,614)
Reassessment of lease terms
14
- (1,075)(1,075)
Lease surrenders and terminations(700)(17)(1,722)
Carrying amount at the end of the period654,619 699,852 673,278
14. LEASE LIABILITIES
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
Note
2023 2022 2022
$ 000 $ 000 $ 000
Movement in lease liabilities
Carrying amount at the beginning of the period820,840 892,191 892,191
Foreign exchange movement(86)- 75
Additions
13
29,937 11,621 34,092
Interest for the period
4
17,751 18,413 36,683
Reassessment of lease terms
13
- (1,075)(1,075)
COVID-19 landlord rent relief- (812)(1,775)
Lease repayments(68,465)(67,068)(134,947)
Lease surrenders and terminations(1,035)(2,344)(4,404)
Balance at the end of the period798,942 850,926 820,840
Lease liability maturity analysis
Within one year96,306 96,782 95,849
One to two years91,722 90,343 90,526
Two to five years231,751 238,966 241,273
Beyond five years379,163 424,835 393,192
Total lease liabilities798,942 850,926 820,840
Current liabilities96,306 96,782 95,849
Non current liabilities702,636 754,144 724,991
Total lease liabilities798,942 850,926 820,840
15. BORROWINGS
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Cash and cash equivalents32,774 149,966 24,999
Borrowings(116,200)- (66,150)
Net debt(83,426)149,966 (41,151)
Committed bank credit facilities at balance date are:
Committed bank debt facilities465,000 330,000 420,000
Liquidity buffer381,574 479,966 378,849
Net cash
Lease liabilities
Right of use assets
The Group complied with the debt ratios and restrictive covenants stipulated in the Group’s negative pledge arrangement with its banks throughout
the half year. Details regarding these covenants and the Group’s liquidity policy, can be found in the 2022 Annual Report.
10
Notes to the Interim Financial Statements - continued
16. DERIVATIVE FINANCIAL INSTRUMENTS
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
$ 000 $ 000 $ 000
Foreign exchange contracts
Current assets3,962 31,536 29,491
Current liabilities(25,704)- (668)
Non current liabilities(653)- -
Total derivative financial instruments(22,395)31,536 28,823
Classified as:
Cash flow hedges(20,524)21,313 17,444
Fair value hedges(1,871)10,223 11,379
(22,395)31,536 28,823
Notional amount (NZ$000) 0 to 12 months491,172 375,193 397,213
Notional amount (NZ$000) 12 to 18 months26,931 - -
Average contract rate ($)0.6200 0.7063 0.6742
Spot rate used to determine fair value ($)0.6491 0.6538 0.6290
Forecast next twelve month USD hedge level (percentage)76.5 69.8 68.9
17. COMMITMENTS
(Unaudited)(Unaudited)(Audited)
As at As at As at
29 January 30 January 31 July
2023 2022 2022
Capital commitments
$ 000 $ 000 $ 000
Within one year29,859 18,103 17,628
18. RELATED PARTIES
Share rights granted1,600,000 770,711
Date grantedOctober 2022November 2022
Vesting dateOctober 2026October 2025
Weighted average cost of equity (%)8.9 8.5
Average share price at grant date ($)3.13 3.01
Estimated fair value at grant date ($)2.96 2.93
19. CONTINGENT LIABILITIES
Commitments
Derivative financial instruments
US Dollar forward contracts
Capital expenditure contracted for at balance date but not recognised as liabilities is
set out below:
The Group has no material contingent liabilities other than those arising in the normal course of business, being primarily letters of credit issued to
secure future purchasing requirements and store lease commitments.
Except for directors' fees, key executive remuneration and dividends paid by the Group to its directors, there have been no other related party
transactions during the period. During the half year the Group granted share rights as a retention incentive to the CEO and five members of the
Group's senior leadership in October 2022 and November 2022 respectively. For each share right the participant is eligible to be issued or
transferred, for nil consideration 1 share on the vesting date (together with dividend equivalents), providing certain conditions are met. The
participants will be delivered the shares net of tax, with the number of pre-tax shares to be delivered reduced by the number of shares equal to the
participant's PAYE obligation.
Fair value
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 are determined using the forward exchange market rates at the balance date. For accounting purposes (NZIFRS 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 continues to manage its foreign exchange risks in accordance with the policies and parameters detailed in the 2022 Annual Report. The
following table lists the key inputs used to determine the fair value of the Group's foreign exchange contracts and hedge levels at balance date.
11
---
Independent auditor’s review report
To the shareholders of The Warehouse Group Limited
Report on the interim financial statements
Our conclusion
We have reviewed the interim financial statements of The Warehouse Group Limited (the Company) and
itssubsidiaries(the Group), which comprise the consolidatedbalance sheet as at 29 January 2023, and
the consolidated income statement, consolidated statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the period ended on that
date, and significant accounting policies and other explanatory information.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying
interim financial statements of the Group do not present fairly, in all material respects, the financial
position of the Group as at 29 January 2023, and its financial performance and cash flows for the 26 week
period then ended, in accordance with International Accounting Standard 34Interim Financial Reporting
(IAS 34) and New Zealand Equivalent to International Accounting Standard 34Interim Financial Reporting
(NZ IAS 34).
Basis for conclusion
We conducted our review in accordance with the New Zealand Standard on Review Engagements 2410
(Revised)Review of Financial Statements Performedby the Independent Auditor of the Entity(NZ SRE
2410 (Revised)). Our responsibilities are further described in theAuditor’s responsibility for thereview of
the interim financial statementssection of our report.
We are independent of the Group in accordance with the relevant ethical requirements in New Zealand
relating to the audit of the annual financial statements, and we have fulfilled our other ethical
responsibilities in accordance with these ethical requirements. In addition to our role as auditor, our firm
carries out other services for the Group in the areas of executive remuneration benchmarking, access to
general training materials and the 2022 Executive Reward report, agreed upon procedures at the Annual
Shareholders’ Meeting and over the calculations of the Negative Pledge Agreement and a tax audit for an
overseas subsidiary. In addition, certain partners and employees of our firm may deal with the Group on
normal terms within the ordinary course of trading activities of the Group. These relationships and other
services have not impaired our independence.
Responsibilities of Directors for the interim financial statements
The Directors of the Company are responsible on behalf of the Companyfor the preparation and fair
presentation of these interim financial statements in accordance with IAS 34 and NZ IAS 34 and for such
internal control as the Directors determine is necessary to enable the preparation and fair presentation of
interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for the review of the interim financial statements
Our responsibility is to express a conclusion on the interim financial statements based on our review. NZ
SRE 2410 (Revised) requires us to conclude whether anything has come to our attention that causes us to
believe that the interim financial statements, taken as a whole, are not prepared in all material respects, in
accordance with IAS 34 and NZ IAS 34.
A review of interim financial statements in accordance with NZ SRE 2410 (Revised) is a limited assurance
engagement. We perform procedures, primarily consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand
T: +64 9 355 8000,www.pwc.co.nz
The procedures performed in a review are substantially less than those performed in an audit conducted
in accordance with International Standards on Auditing and International Standards on Auditing (New
Zealand) and consequently does not enable us to obtain assurance that we might identify in an audit.
Accordingly, we do not express an audit opinion on these interim financial statements.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our review work has been
undertaken so that we might state to the Company’s shareholders those matters which we are required to
state to them in our review report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the shareholders, as a body, for our review
procedures, for this report, or for the conclusion we have formed.
The engagement partner on the review resulting in this independent auditor’s review report is Lisa Crooke.
For and on behalf of:
Chartered AccountantsAuckland
22 March 2023
PwC13
---
Quarterly Sales
Reporting Period 26 weeks to 29 January 2023
Previous Reporting Period (2022) 26 weeks to 30 January 2022
Previous Reporting Period (2021) 26 weeks to 31 January 2021
Quarterly Retail Sales information:
SalesSalesSales
(1 August 2022 to 30 October 2022)
202320222021
($ Million)($ Million)($ Million)
The Warehouse 414.6 298.2 379.5 + 39.0 % + 9.2 %
Warehouse Stationery56.9 48.2 61.8 + 18.0 % - 7.9 %
Noel Leeming246.6 238.7 250.8 + 3.3 % - 1.7 %
Torpedo737.4 34.2 33.8 + 9.4 % + 10.7 %
Total Group
1
764.7 630.7 738.5 + 21.2 % + 3.5 %
SalesSalesSales
(31 October 2022 to 29 January 2023)
202320222021
($ Million)($ Million)($ Million)
The Warehouse 599.1 597.2 587.8 + 0.3 % + 1.9 %
Warehouse Stationery67.2 73.8 74.8 - 8.9 % - 10.2 %
Noel Leeming310.1 344.0 342.4 - 9.9 % - 9.4 %
Torpedo759.0 63.3 51.1 - 6.8 % + 15.5 %
Total Group
1
1,048.5 1,099.3 1,069.8 - 4.6 % - 2.0 %
SalesSalesSales
(1 August 2022 to 29 January 2023)
202320222021
($ Million)($ Million)($ Million)
The Warehouse 1,013.7 895.4 967.3 + 13.2 % + 4.8 %
Warehouse Stationery124.1 122.0 136.6 + 1.7 % - 9.2 %
Noel Leeming556.7 582.7 593.2 - 4.5 % - 6.2 %
Torpedo796.4 97.5 84.9 - 1.1 % + 13.5 %
Total Group
1
1,813.2 1,730.0 1,808.3 + 4.8 % + 0.3 %
Store Numbers
20232022202320222023202220232022
Start Quarter 2889068 71 68 70 24 21
End Quarter 2889068 71 67 70 25 22
20232022202320222023202220232022
Start Quarter 2473,359 486,051 83,064 85,541 52,452 62,867 31,200 27,030
End Quarter 2473,359 486,051 83,064 85,541 51,285 62,867 33,179 28,319
- - - -
- - 1 -
- - - -
1 - - -
Note:
1) Total Group sales includes TheMarket segment, eliminations and other Group operations in addition to the 4 main retail operations detailed above.
The Warehouse Group Limited
Supplementary Information
The Warehouse
Noel Leeming
Torpedo7
Store changes during the quarter
The Warehouse
Warehouse Stationery
Warehouse StationeryTorpedo7Noel Leeming
Store footprint
(Square Metres)
Noel LeemingWarehouse StationeryTorpedo7The Warehouse
Store
closure
Extension/
reduction
New
store
Replacement
store
Second quarter sales
Change in
sales
vs 2022
Change in
sales
vs 2021
First quarter sales
Change in
sales
vs 2022
Change in
sales
vs 2021
Year to date sales
Change in
sales
vs 2022
Change in
sales
vs 2021
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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