The Warehouse Group’s reset gains traction as debt drops and profit returns

Profit returns while debt is almost cleared

The Warehouse Group Limited (NZX:WHS) has restored profitability without relying on a consumer recovery. Operating profit, measured before NZ IFRS 16 and unusual items, rose to NZ$22.6 million in the 52 weeks ended 2 August 2026, from NZ$1.3 million a year earlier, while comparable sales fell 0.2% and same-store sales increased 0.4%.

The balance sheet moved even more sharply. Free cash flow reached NZ$79.4 million, compared with an NZ$45.2 million outflow in FY25, allowing net debt to fall to NZ$17.0 million from NZ$96.1 million. Operating cash flow climbed to NZ$193.5 million, helped by a NZ$37.9 million reduction in inventory and a NZ$22.9 million working-capital inflow.

Margin and cost discipline did the heavy lifting

Revenue was NZ$3.028 billion, down 1.9% on the prior year, although FY25 included an extra trading week worth NZ$51.9 million. Against that muted top line, gross margin improved 40 basis points to 32.6%, while cost of doing business fell 40 basis points to 31.8% of sales. The company said it was the first year since FY21 that both measures moved in the right direction.

The reported result also included NZ$5.7 million of restructuring costs tied to head-office redundancies, the Tata Consultancy Services partnership and the closure of the Indian sourcing subsidiary. Statutory net profit attributable to shareholders was NZ$11.2 million, versus a NZ$2.8 million loss in FY25, while adjusted NPAT was NZ$13.5 million. The presentation’s operating profit measure is non-GAAP, so the improvement is best read alongside the audited statutory numbers rather than in isolation.

Two brands improved, one remains the test

Warehouse Stationery delivered the cleanest turnaround, with operating profit nearly doubling to NZ$15.9 million as comparable same-store sales rose 2.0%. Noel Leeming made the largest contribution to the earnings recovery: operating profit increased to NZ$21.8 million from NZ$11.7 million, despite broadly flat comparable sales and continued pricing pressure in technology and audio-visual categories. Its online sales rose 13.2% to NZ$133.0 million.

The Warehouse, by contrast, remains the group’s central problem. Its operating loss narrowed to NZ$7.5 million from NZ$12.2 million, and same-store sales rose 0.6%, but the brand’s full-year margin was still 20 basis points below FY25. A stronger fourth quarter, particularly in Home and Apparel, provided early evidence of progress; it did not yet amount to profitability.

Dividend withheld as investment continues

The board declared no final dividend for FY26, despite adjusted NPAT returning to positive territory. It said retaining capital to support the recovery and strategic investment was appropriate, while maintaining its intention to resume dividends in the future. Capital expenditure rose to NZ$21.1 million from NZ$12.4 million, with spending directed towards stores, operations, property, digital and supply-chain initiatives.

The company’s first eight weeks of FY27 produced group sales broadly in line with the prior year, with margin performance ahead of the prior comparable period. Management has not issued formal earnings guidance. Instead, it has identified further margin recovery at The Warehouse, stronger inventory productivity and supply-chain improvements as the main levers, with an Investor Day scheduled for November to outline the longer-term strategy.