FY23 has been a tough year for The Warehouse Group. A challenging trading environment with Kiwi families experiencing rising inflation, increased cost of living and rising interest rates has intersected with the Group being mid-way through a transformation programme and peak year of spending on information systems and digital infrastructure. As a result, we have had to make difficult decisions to reprioritise some of our strategic initiatives as we navigate these challenges.
Despite the ongoing macroeconomic environment, we have seen pleasing sales growth for the Group, achieving $3.4 billion in total Group sales, up 3.2% on the prior year. We saw a particularly strong sales result in The Warehouse of $1.9 billion – the brand’s highest sales year on record and up 9.6% on FY22. Refer to our CEO Report for more commentary on brand performance.
Customers have responded to the economic climate by reducing their spending on higher discretionary items, impacting our other brands’ sales.
The Group finished the year with a disappointing adjusted net profit after tax of $37.5 million for FY23, compared to $85.5 million in FY22, with reported net profit after tax of $29.8 million, after unusual items of $13.9 million, compared to $89.3 million in FY22. This year there are number of unusual items reflecting actions taken around our investment in Zoom Health, restructure and redundancy costs, and the closure of the 1-day business.
As the Group has traded through this environment, it has managed to strengthen its balance sheet from the half year, providing available liquidity of $421.9 million at year end. This is within our target liquidity range of $350 million to $450 million.
Making a difference in sustainability
Our commitment to make sustainable living easy and affordable for everyone starts with the products we sell. I am immensely proud of our sourcing teams who work with our local and international suppliers to ensure our product and packaging are more sustainable.
We have increased our efforts this year, and now 33% of our private label sales in The Warehouse and Warehouse Stationery are products with one or more sustainable features, up from 22% in FY22. This represents 46,637 product lines and $343 million in sales. In addition, 43% of our private label sales were derived from products with packaging that is compostable or which can be recycled via New Zealand’s kerbside recycling infrastructure or instore, up from 22% in FY22.
Internally, our passenger fleet now comprises 100% electric vehicles (EVs), our sea freight and international airfreight emissions reduced by 11.6% and 62.5% respectively, and we diverted 72.9% of our operational waste to recycling.
We helped our customers recycle 198.9 tonnes of post-consumer waste through our soft plastics, e-waste, and ink and toner recycling programmes.
In September 2023, we completed negotiations with Lodestone Energy, a new developer and operator of solar electricity farms. This will result in over 260 The Warehouse Group sites being supplied by solar electricity as early as 2026 – significantly reducing our Scope 2 emissions.
In December 2022, the New Zealand External Reporting Board (XRB) released the Aotearoa New Zealand Climate Standards (NZCS). New Zealand is leading the way on mandatory climate reporting, and we are pleased to be one of the driving participants in developing the New Zealand retail sector scenarios for this framework. These scenarios will be used to identify climate-related risks and opportunities and develop our transition plan to a 1.5-degree world. The New Zealand retail sector scenario public report was released on 19 September 2023 and can be found here.
Looking after our people and customers
We are deeply concerned by the continuing increase in retail crime. The safety of our store team members and customers is our absolute priority. We have continued to invest in safety measures and support services for our team members – such as training our store team members in incident management and investing $1.8 million to strengthen store security across all our brands and particularly in our Noel Leeming stores.
Supporting our communities
Our teams have continued to step up when it matters most. Earlier this year, the devastation of floods and Cyclone Gabrielle shook our country. I want to make a special mention of our Napier, Hastings, Tairāwhiti Gisborne, Northland, Auckland and Coromandel teams, whose resilience and teamwork have been incredible in very difficult circumstances.
Thank you to our customers who donated over $250,000 through our “Add $1” campaign to raise money for affected families. Combined with The Warehouse Group’s contribution of $200,000 (cash and product) we donated over $450,000 to local community groups supporting families with relief.
The Warehouse Group has a strong history of giving back to its communities, having raised $83.4 million since 1982. This year we announced our new Here for Good Leave. This gives our team members eight hours of paid leave each financial year to volunteer in a meaningful way for them, recognising the close connection we have in the communities within which we operate.
I want to acknowledge and thank the Board for their contribution throughout the last year. Their leadership and contribution have been superb as we help guide The Warehouse Group through a challenging period.
I am proud that we’ve continued to attract the highest quality Directors to work with The Warehouse Group Board. This year we welcomed Jeremy O’Brien as a Future Director, replacing Caroline Rainsford who joined the Board as a Director in August 2022. Both appointments reflect the success of the Future Directors programme, co-founded by Sir Stephen Tindall, as it works to develop the next generation of Directors. We have gained great benefit from this excellent scheme.
In October 2022, we entered a four-year retention arrangement with Group Chief Executive Officer Nick Grayston. Since joining The Warehouse Group in 2016, Nick’s strategic leadership has steered us through a significant period of transformation. He will play a critical role in implementing The Warehouse Group’s long-term strategy and we want to ensure his leadership throughout this time.
At the Annual Shareholders Meeting (ASM) in November 2022, I announced my intention to conclude my tenure as Chair of The Warehouse Group at the FY25 ASM and I look forward to continuing to work with Nick through the intervening period.
The Group dividend policy is to distribute at least 70% of the Group’s full year adjusted net profit at the discretion of the Board and subject to trading performance, market conditions and liquidity requirements.
In accordance with this policy, due to the trading performance, net debt, and liquidity levels at the half year, the Board made the difficult decision in March not to pay an interim dividend. Given the return of net debt to levels that meet our target liquidity range of $350 – $450 million, and in accordance with our dividend policy, the Board is pleased to declare a final dividend of 8.0 cents per share. The record date for the dividend will be 16 November 2023 and will be paid on 1 December 2023.
The year ahead
Looking ahead, we are confident our customers will continue to find the best value options across our brands, and we will remain top of mind for Kiwi families as they make tough choices about how to spend their income. We are conscious we need to do better and are confident we have put remedial actions in place to improve our Group performance.
On behalf of the Board, I’d like to extend heartfelt gratitude to all our valued customers across all our brands. Thank you for choosing us. I also want to recognise our Group Chief Executive Nick Grayston, our outstanding Leadership Squad, and our 11,000 team members. Being part of a team that comes together around a challenge and takes fast action is a privilege.
As always, to our shareholders, the Board and I value your support and look forward to meeting with you at our Annual Shareholders’ Meeting in November.
Joan Withers – Chair