Warehouse and revenue, fierce competition and turnover efforts have carried out fierce competition
Interim CEO John Journee leads the turnaround effort, focusing on resetting the business and solving legacy issues, although the company made $11.8 million in profits in the first half of 2025, despite a 1.6% decline in revenue, compared to 2024, to $1.6 billion.
Retailers’ revenues before interest and taxes also took a significant hit, down 54.5% to $19.5 million, while gross margins fell by another 180 basis points to 32.5%.
However, according to several analysts, the warehouse is a “sunset” brand, indicating a long-term decline due to market share loss and shifts in consumer preferences.
But Journee sounds confident and points out that the transition is still in its early stages, but the results are encouraging early signs.
“These are our first results under the new strategy, which reflect the transitional business. We will focus on, address legacy issues and embed the structure and approach of our brand leadership. We are very focused on what we can do and what we can do and what we are doing. I think the remaining opportunities on the table can get along with them and have the scope of others on the table. The difference between warehouse and Kmart’s supply chain and procurement process. Kmart’s unique model, where 85% of its products come from its in-house brand Anko, has better control over production and faster product development.
Kmart revealed that its bumper in fiscal 2024 had $106 million in profit. Anko products are designed by Anko Global, a product development company owned by Kmart, and leverage a network of 900 manufacturers, which can bring new products to the market in just 180 days.
“They (kmart) can have more control over the production and the final product, and the warehouse is more of the traditional retailer model, where they have to go out and find existing products that can be purchased and stocked for the end customer,” Matthews said.
“There is a big difference between these two business models, which reflects the operating margin.”
In fiscal year 2024, the warehouse’s operating margin was about 2%. Kermatt’s 2024 result is about 16%, eight times higher. Grocery growth in warehouses, low-profit segments, further pressure. Grocery stores now account for 25.8% of total warehouse sales, with category sales up 12.5% in fiscal 2023.
“Their home and clothing segments are shrinking, they are higher margin segments, and ideally you want to make up for more sales. If you don’t have a good gross margin start, you will never get a good operating profit at the end,” Matthews said.
Forsyth Barr Analysis predicts that IKEA will earn $191 million in sales in its first year of business. It is expected to occupy 6% of the New Zealand furniture, floor coverings, household goods and textile market. Warehouses currently account for 11% of this market share, with Kmart accounting for 7%.
Chris Wilkinson, managing director of First Retail, believes there are many large box retailers that spread to the warehouse category. “For them, the challenge is that they are in this very difficult middle ground. All these areas that may have won in the past, there is this nibble. There are many different categories in Western Australia that make them particularly challenging to find something that can decide themselves and succeed and succeed.”
Wilkinson said consumers are aware of the value of the staple products it introduces, but getting them to realize that warehouses are a more difficult task for serious grocery stores.
“The biggest challenge is that they have to be able to deliver the grocery store easily. If you have only one aisle, the key is that you don’t need a lot of products. The real aspect is to have quantity, less is key, and be able to provide convenience. If they can take advantage of it and actually get it around it,” he added.
Imports of low-value goods are purchased directly by households, up nearly a third last year, more than doubled since before the pandemic.
Forsyth Barr analysts Paul Koraua and Rohan Koreman-Smit describe four phases of retailers: growth, optimization, maturity and sunset. They believe the warehouse is “demonstrating all the characteristics of the company in the sunset.”
Koraua explained that classification does not mean that the business will be going on in the near future, but rather about the trend that the business has been trending over the past 10 to 15 years.
“If you take a wide lens and browse it over the past 20 years, you’ve seen a huge drop in the earnings of interest and tax (EBIT) margins,” Koraua said.
“For the company, gross margins are still very stable, but in the long run, it is really a loss of market share and uncontrollable costs, which really hurts the most.”
Koraua believes that identifying the opportunity area for warehouses is a “super difficult problem”. “They tried to do it online and become New Zealand Amazon and that was crashing. They tried to turn the extra everyone in the warehouse into everyone, and it crashed. They tried to move to Australia and that didn’t work.”
Koraua highlights the company’s network of stores and heritage in New Zealand, the main differentiator.
Interim CEO John Journee said it had been a signal for some time that fiscal 25 will be tough, and investments are focused on improving stores to be brighter and more attractive to customers. “We have been sending a signal for some time that fiscal 25 will be difficult and it is still the case,” he said.
“Our backfoot is on backfoot, but today, we are in much better shape to deal with uncertainty in the future. We are not waiting for the economy to turn its fortunes around, and our job is to speed up the momentum we are building, expand the victory and ensure we are consistently performing our work.”
