Good morning and welcome. My name is Silv Roest, and I'm the Chief Legal and Corporate Affairs Officer and Company Secretary at The Warehouse Group. Before I hand over to our Chair, Dame Joan Withers, for the opening of the meeting, I'd like to cover a few points of housekeeping. In the event of an emergency, please follow our team's directions. The fire exits are located through the side doors on both the left and right-hand sides of the building. Please follow our fire wardens should the alarm sound. The assembly point is on the fire car park. The bathrooms are opposite the entrance you came through, and if you walk down here to the right. If you need voting forms, the team at MUFG will be able to help you.
Finally, following today's meeting, the Board and Management Team look forward to you joining us for refreshments over at the end of the room. Thank you, and I now invite the Chair, Dame Joan Withers, to open the meeting.
Thank you very much, Silv. [Foreign language] Good morning, and thank you for joining us here at The Warehouse Group offices. We are thrilled to be able to use our own facilities for this annual meeting. As Silva said, my name is Joan Withers, and I'm Chair of The Warehouse Group. Today's meeting is being conducted both in person and online. We are very pleased to welcome those of you participating online through the virtual meeting platform that's provided by our share registrar, MUFG Pension and Market Services. I'll provide you with further instructions as we progress through the meeting, but if you encounter any issues, please refer to the virtual meeting online portal guide, or you can phone the helpline on 0800 200 220.
On behalf of your Directors, our Group Chief Executive Officer, Mark Stirton, and our Executive Team, I extend a very warm welcome to you all to our annual shareholders meeting. To those of you here in person today, and to everyone online. Sitting with me up the front today are members of the Board of Directors, and we've also got the Executive Leadership Team here. Starting from your left, please join me in welcoming John Journee, Dean Hamilton, Robbie Tindall, Tony Carter, Rachel Taulelei, Caroline Rainsford, Hamish Rumbold, and our Group CEO, Mark Stirton, and our Group CFO, Stefan Knight. As I said, also with us here today are members of the Executive Leadership Team, and they're sitting up here in the front row.
Finally, I'd like to welcome the team from PricewaterhouseCoopers, who are our company auditor, and the team from our share registrar, MUFG Pension and Market Services. They will help conduct the voting on the formal business later in the meeting, and they will act as scrutineer. Now to the agenda. Before we proceed with the formal business, I'm just going to run through the order of events for today's meeting. The agenda will start with the usual formalities, and I will give an overview of the year that has been. Our incoming Chair, John Journee, will then address you and introduce himself. Our Group CEO, Mark Stirton, will provide an update on our strategy, a recap of our FY 2025 annual results, an update on the first quarter of the current financial year, and some commentary on the remainder of FY 2026.
We will then turn to the formal part of the day's business. The resolutions today include the re-election of two Directors, Caroline Rainsford, and our new Director, Hamish Rumbold. We have also had a resolution authorizing the setting of the auditor's fees. We are going to cover each resolution in turn and invite you to submit your questions specific to those items. We will respond to those questions during the Q&A session for each resolution. Voting will take place by poll, and I will outline the process for discussion and voting on the resolutions at that point in the agenda. Voting will remain open for five minutes after the conclusion of the meeting. Following the resolutions, we will take questions on the group's financial performance, our operational performance, or other general business. I do ask that you wait to raise any general questions until that time.
We'll now move to the formal agenda. The notice convening today's meeting was circulated to shareholders on the 31st of October. I note that a quorum is present, so I am pleased to declare the 2025 Annual Shareholders Meeting of The Warehouse Group officially open and underway. Now to proxies. Proxies have been received from 279 shareholders representing 196,398,462 voting shares. This represents 56.62% of the voting shares in the company. I will provide further details on proxies for each resolution at that time. To the annual report. The financial statements for the 53 weeks ended 3rd of August 2025, together with the auditor's report, are set out in the company's 2025 annual report, which was released to the NZX on the 2nd of October 2025. If you'd like a copy or a hard copy of the annual report, please email us.
Under the Companies Act 1993, there is no requirement to approve the financial statements or the auditor's report at annual meetings. However, we will be happy to answer any questions you may have during the Q&A session at the end of the meeting. Turning to the procedures for Q&A, during this annual meeting, anyone in the room or online will be able to ask questions and to vote, and I do encourage you to do so. For those of you online, you can send through your questions at any time through the online portal by clicking the Ask a Question button within the virtual meeting platform. Select the item of business, type in your question, and click Submit. I do encourage you to do this as early as possible so we can answer your questions at the appropriate time in the meeting.
Please note, though, that some online questions may be moderated or amalgamated together if we receive multiple questions on one topic. Now we will move to the substantive part of my presentation. FY 2025 review. Financial year 2025 was one of the most demanding years in recent memory for The Warehouse Group, shaped by tough economic conditions and a sharp decline in consumer confidence. Rising unemployment and tighter household budgets led to a significant slowdown in discretionary spending, while competition across the retail sector intensified. We made deliberate choices to reset the business. FY 2025 was a year of streamlining our operating model, resetting price points, improving product ranges, and applying stronger discipline to cost and capital management. These actions were essential to lay the foundation for a turnaround.
During the financial year, our group sales held steady at NZD 3.1 billion, but it is important to note that FY 2025 included an additional trading week, so on a like-for-like basis, sales were basically flat, but that reflects resilience in a difficult market. Conversion improved, and unit sales grew strongly across all three brands, with encouraging momentum in the second half, particularly at The Warehouse and Noel Leeming. Margin came under pressure, and profitability suffered as a result. Gross margin declined across the group by 140 basis points, significantly impacting the group's bottom line. This was primarily driven by early price resets at The Warehouse and a category mix skewed towards lower margin products. The second half brought some improvement. Category mix strengthened and unit growth lifted across the group, supported by sharper pricing and on-trend products, especially in home apparel, toys, and beauty at The Warehouse.
We also introduced new brands as part of our range refresh. Cost control remained a very clear focus. Our cost of doing business decreased by 40 basis points to 32.2% of sales, despite inflationary pressures on rent, utilities, and wages. Capital management was disciplined. Projects were rationalized, and elevated IT spend tapered off. Capital expenditure fell to NZD 12.4 million, which was down significantly from NZD 39 million in FY 2024. Our operating profit was NZD 1.3 million, and we reported a net loss of NZD 2.8 million. Given this financial performance, the board determined it should not declare a dividend for FY 2025. That is deeply disappointing, and I want to acknowledge the impact on our shareholders. As you will hear through Mark's presentation, we are taking comprehensive action to restore profitability and deliver value back to our shareholders.
While we have made progress on cost control during FY 2025, it was not enough to offset the margin decline, and as announced with our Q1 trading update earlier this month, work is underway to further reduce our cost base. Again, Mark will take you through additional details on this shortly. We now have a new leadership team in place. They are aligned on our goals, focused on execution, and committed to accelerating progress to rebuild profitability and to unlock the full potential of our brands. The appointment of Mark Stirton as Group Chief Executive Officer effective on the 1st of August was a pivotal moment for The Warehouse Group. After a comprehensive global search, the board was unanimous that Mark is the right person to lead the company forward. Mark brings outstanding experience and capability. His decade at Mr.
Price Group, including as Group Chief Financial Officer, combined with his chartered accountancy qualifications and an MBA in business transformation, give him the qualifications and experience, the commercial credibility, and strategic insight to deliver the performance needed to create value for shareholders. He has already hit the ground running. Mark is leading with intent and driving momentum, bringing discipline to control to operating costs and capital expenditure, and sharpening the focus on retail fundamentals to turn the business around. Now to the Board of Directors. I would like to take a moment to acknowledge some important changes to our Board. Today, we recognize Robbie Tindall, who is retiring from the Board at this Annual Shareholders Meeting. Robbie joined as a Director in 2020 after several years as an alternate Director for Sir Stephen Tindall.
His deep understanding of our business, his passion for sustainability, and his steady guidance have been invaluable. He has always been a very vaLued colleague to me and my fellow Directors. Robbie leaves to dedicate more time to K1W1, which is the Tindall entity which invests in early-stage startups in New Zealand across a diverse range of industries, and we wish him every success. We are delighted to welcome Hamish Rumbold, who joined the Board just on the 19th of November and who's standing for re-election today. Hamish brings extensive experience in brand and customer strategy, digital and technology, and retail leadership. His skills strengthen the board's capability. As I foreshadowed when I stood for re-election back in 2022, this is my last annual shareholders meeting as Chair and as a Director of The Warehouse Group.
Over the past nine years, I've had the privilege of leading this iconic New Zealand business through periods of growth and through some of the most challenging times in our history. The past few years have been particularly difficult, and I want to acknowledge the impact on our shareholders. The company's performance has weighed heavily on the Board and on me personally. Despite the challenges, I am proud of the resilience this company has shown. We are not yet where we want to be, but we have a clearer focus, stronger leadership, and a renewed determination to deliver for all of our stakeholders. To our shareholders, our customers, our team members, and of course, my fellow Directors, thank you. Your support and commitment have meant a great deal to me, and it's been an honor to serve as Chair.
I am absolutely delighted that John Journee will succeed me as Chair following today's meeting. John's experience on the Board and in executive roles within the Group, including his time as interim CEO, means he brings both operational insight and strong governance capability. His appointment provides continuity and confidence as the Group moves into its next phase of transformation and growth. I'm now going to hand to John so that he can address you all as our incoming Chair.
Thank you, Joan. It's a great honor to stand before you today as the incoming Chair of The Warehouse Group. I take this responsibility seriously, and I'm deeply committed to serving and returning value to you, our shareholders. Before I speak about the future, I want to acknowledge Joan's extraordinary contribution. Over the past nine years, Dame Joan has led the Board with clarity, courage, and unwavering commitment.
Her leadership has been decisive, her integrity absolute, and her belief in this company steadfast, even through our most challenging times, including the COVID-19 pandemic and the tough decisions of the past 18 months. Joan has been instrumental in shaping The Warehouse Group's governance. Under her leadership, we strengthened our focus on sustainability, advanced gender equity, and navigated significant transformations. She has ensured the company reflects the communities we serve, and her influence has helped to position The Warehouse Group as a leader in responsible retailing. On behalf of the board, management, and our team, Joan, we thank you. It has been a true privilege to work alongside you. As I step into this role, my focus is clear. While I bring continuity and stability, my priority will be to supporting the pace, discipline, and initiative required to execute our turnaround.
My experience spans more than 40 years in retail, including 23 years with The Warehouse Group in both executive and governance roles. I understand our heritage and what made us great. Most recently, I had the opportunity to serve as interim CEO, which gave me deep insight into the current operational realities of the business and the opportunities for it to improve. I am passionate about the brands, our people, and our customers. I know the challenges we face. I also know the potential we have to unlock. My commitment is to work closely with Mark Stirton and the Leadership Team to ensure we deliver the critical value drivers for this business. That means sharper execution, more relevant customer connection, and a relentless focus on rebuilding profitability and creating long-term value for our shareholders. To our shareholders, thank you for your continued support and belief in The Warehouse Group.
We have work to do, and I'm confident that we're well positioned to succeed. Thank you. I will now hand over to Mark Stirton, talk to you about the group's direction and financial performance. Mark.
[Foreign language] everyone, and welcome. Thank you, Joan and John, and good morning, everyone. It's a privilege to address you today at my first annual shareholder meeting as Group Chief Executive Officer. I want to begin by thanking Dame Joan and John Journee for their leadership and support as I've stepped into this role. Their guidance has been invaluable during this critical time of the group's history. Since stepping into the CEO role in August, my priority has been to set the playing field and align the organization around clear goals and performance expectations. I firstly want to recognize the commitment of our people. This is a fantastic business with a passionate group of people.
Across our stores, distribution centers, and support office, and our product teams, our people continue to show up every day with the determination in what remains a very challenging retail environment. Their hard work and resilience are crucial to turning this business around. I've set about enabling the business to run at two speeds: reducing costs now to recover profitability while continuing to invest in the areas that will strengthen the group for its long-term future, like stores, product prices, and supply chain. I've spent a great deal of time in our stores and in our distribution centers listening, learning, and challenging our teams to solve the issues that affect our customer experience. The reality is that trading conditions are tough. The economy is slow to recover, household budgets remain under pressure, and competition is intense.
We are working hard to deliver the products and experiences our customers expect and to improve our financial performance at pace. It is clear to me that our competitive advantage lies in our stores, footprint, and our footfall. We have the highest number of stores of any New Zealand general retailer, with 1.7 million visits per week coming through our doors. We are embedded in New Zealand communities, and it is within our gift to show up for these communities and customers better than we have to date. It is also apparent that we have work to do on delivering the right range of products at the right prices. We have taken our eye off the ball and our core brands and core categories that make us money, and we're fixing that now.
That means bringing back on-trend products in home and apparel and ensuring that essential items our customers need are available at value-driven prices. To enable this, I've set a disciplined direction for the group, one that balances immediate performance with long-term growth, and have strengthened our Leadership Team to improve execution in critical parts of the business. Our Executive Team, several changes have been made to our Executive Leadership Team to position the group for success. During the year, we welcomed two new outstanding leaders. Stefan Knight joined us as Group Chief Financial Officer, taking over from me, and he came from Spark New Zealand, bringing deep financial expertise and strategic insight. Shayne Tong came on board as Chief Digital and Transformation Officer from Foodstuffs, adding strong digital and transformation capabilities to our team. We were equally proud to promote high-caliber internal talent.
Silv Roest, who addressed you a little bit earlier, stepped into the role as Group Chief Legal, Corporate Affairs and Sustainability Officer, while Carrie Fairley was appointed Chief Merchandise Officer for The Warehouse and Warehouse Stationery. Our Group Chief Sourcing and Supply Chain Officer, Mark Anderton, who has been based in China and been with us for the last 10 years, will depart us in March. We thank Mark for his many years of service to the business and have taken the opportunity to rethink our leadership structure. Moving forward, sourcing will become part of the Chief Merchandise Officer role, creating a single home for decision-making on our ranges. At the same time, we have appointed Lyle Brady, who is our current GM of Supply Chain, to the leadership team as Group Chief Supply Chain Officer, giving logistics a clear voice at the table.
As a team, we are aligned on the priorities that matter most to rebuilding this business: building an unbeatable culture, rebuilding profitability, unlocking brand potential, and delivering long-term shareholder value. Group direction. As mentioned, we have reset our group's direction. Our group purpose is to build exceptional retail brands that customers love, our teams take pride in, and that deliver sustainable shareholder returns. This is not just a statement. It is the lens through which we are making every decision. Our group ambition is to be a highly desired retail stock. Our strategy is anchored in restoring profitability through better trading and positioning the business for sustainable future growth. Our group values remain unchanged. Think customer, do good, and own it. These values continue to guide our culture and our decision-making.
Our strategy will revolve around strengthening and growing our three New Zealand retail brands, enabling each to lead in its market while leveraging shared services, platforms, and capital. Later in FY 2026, we will share our longer-term strategy for the group and each of our brands. The potential of the brands. As we look ahead, one thing is clear. The potential of our brands is vast, and there are signs of progress. What is clear to me on review of our merchandise portfolio is that we have a portfolio of very valuable private label brands, which have been built up over decades, which our customers love. Our job is to further invest in making these brands and products even more desirable. We are starting to see a shift in consumer preference in key categories. In FY 2025, The Warehouse reclaimed its number one spot in toys, with the sales up over 8%.
We also saw preference gains in home, apparel, pet care, party supplies, sports, and outdoors. We've done a range refresh. Customers told us they wanted more excitement, trend, and color in our ranges. Our teams have started refreshing most categories within the portfolio, starting with home and apparel because of the materiality they have to the group. We've also recently introduced health and beauty, which is doing really well to date. Early feedback is encouraging, and this is just the start. We have a lot more work to do, and our teams are already planning trend-led seasonal collections for summer and winter 2026. Store experience and reach. Our reach remains a strategic advantage. Over 85% of Kiwis live within 20 minutes of our stores. Our key opportunity is to improve our storytelling in the store.
We have great value products, but we have work to do to improve our visual merchandising and store experience to make them come to life. Our new Beauty Zones and Apparel layout trials are just the beginning of several transformations customers will start to see. Our brand-led strategy is gaining traction. However, we know there is much more work to do to unlock the full potential in the years and months to come. Now, moving to FY 2025 annual results in more detail. As Joan said, before we look at the numbers, it is important to note that this FY 2025 was a 53-week financial year compared to a 52-week in FY 2024. Where appropriate, we compare FY 2025 on a 52-week same-store sales basis with FY 2024, removing the final 53rd week of FY 2025. Group sales for the FY 2025 financial year were up 1.6% and flat on a 52-week same-store basis.
Retail conditions were challenging throughout the year in a low-growth economy, and the year was a story of two halves. While sales declined 1.6% in the first half, we delivered a turnaround in the second half with growth of 1.6% on a like-for-like 26-week basis. The group pleasingly sold 4.6% more units in FY 2025. However, this was offset by a decline of 4.4% in average selling prices. The group gross profit margin, as Joan mentioned, declined 140 basis points to 32.2% and had the biggest impact on profitability in FY 2025.
The group's gross profit margin decreased due to four main factors: the strategic reset of everyday low prices, particularly in The Warehouse, on existing products; lower inventory sell-through due to products that did not resonate sufficiently with customers, which led to additional clearance activity; sales contributions from our lower margin categories, particularly in The Warehouse; and sales growth in Noel Leeming, which had a great year but is one of our lower margin brands, which contributed higher to the overall gross margin. The decline in gross margin was smaller in the second half than it was in the first half, with more stable pricing and better category mix and lower supply chain costs. To offset these margin impacts, we focused on controlling what we could. CODB was only up 0.2%, mainly due to that extra week.
If we had not had the extra week, we would have actually gone negative, but slower than sales growth and reduced as a percentage of sales. In FY 2026, we are targeting further margin improvements and CODB reduction to drive financial performance. People and communities. Even in challenging years like FY 2025, we stayed committed to looking after our people, our communities, and our environment. It's fundamental to who we are at The Warehouse Group. We maintained 100% gender pay equity, and our employee and net promoter score rose to 36 from 18 in the prior year. That's a strong signal that our teams feel more engaged as we work to build a high-performance culture. Together with our customers, we raised NZD 2.4 million for New Zealand charities. That impact matters, and especially in a year when households and communities are doing it tough. We also made strong progress on our environmental commitments.
66% of our private label sales now use sustainable packaging. Our Scope 1 and 2 emissions are down 45% compared to FY 2023, and more than 150 stores and sites are now powered by Lodestone's energy solar farms, and we diverted 79% of operational waste from landfills. These are meaningful steps that reflect our long-term commitment to sustainability and our belief that doing good is part of being a good business. FY 2026 Q1 results that just came out recently. Group sales were up 0.9% to NZD 674.1 million, with like-for-like same-store sales up 0.1%. At a brand level, The Warehouse delivered sales growth of 0.7%, Warehouse Stationery sales grew 2.6%, and Noel Leeming achieved growth of 0.7%. Pleasingly, foot traffic across the group remains up at 0.2% and conversion improving 30 basis points. This shows more customers are visiting stores and responding to improved product lines in key categories.
However, margins remain under pressure, with group gross profit margin was down 40 basis points in the quarter. A warmer winter led to slower sell-through at The Warehouse, resulting in increased clearance activity impacting the value perception of our new spring home and apparel ranges. Conversely, Noel Leeming and Warehouse Stationery margins improved. Trading conditions are challenging. While customers are responding to new ranges and in-store experience, margin improvement and cost reductions are an imperative to restoring our profitability. Cost reset. To help restore profitability and make sure our cost base is fit for a competitive value retailer, we are implementing a comprehensive cost reset program. This is needed to deliver on our intention to reduce the cost of doing business to below 31% of sales. This program is about taking decisive action.
It will focus on continuing to drive down costs of doing business and includes a proposed reduction in head office roles. We are also pursuing opportunities to expand our partnership with Tata Consultancy Services to potentially co-source additional areas of the business to gain more efficiencies and capabilities. These decisions are not made easily, and we are committed to supporting our teams through this change and with care and respect. Looking ahead, the retail environment in New Zealand remains challenging. Low consumer confidence and ongoing cost of living pressures continue to impact household spending. These conditions are likely to persist into early 2026. As we look ahead to Christmas, we remain cautious. We will pull every lever we have to deliver a successful peak trading period. We are targeting margin recovery, overhead reductions, and unlocking working capital. Profitability depends on scaled improvements in higher margin categories across the group.
Overhead management remains a priority, and deep cost transformation projects are underway. Capital investment will be directed to the most impactful projects, and we're actively pursuing selective space growth opportunities. We will share further details of our refresh strategy later in FY 2026. I know that words are not what our shareholders, our customers, and our team members want right now. You want action, execution, and improved performance. That is exactly what we as a team are committed to delivering. The team and I are working tirelessly to improve performance, and we look forward to reporting on our progress in the coming months. However, a turnaround of this magnitude will take time, and we thank you for your patience. I wish you all a happy Christmas and a summer ahead.
Thank you, and I now ask Dame Joan to return to the lectern to conduct the formal part of today's business.
Thank you very much, Mark. As I said earlier, the board is working very closely with Mark and the refreshed Leadership Team to continue to improve our business performance. I would like to thank you, our shareholders, again for your continued support. We look forward to giving you an update at the half year. We now come to the matters requiring resolutions, which are outlined in the notice of meeting. All voting at today's meeting will be by way of poll. Shareholders joining us here today, you should have been given a shareholder voting card as you came in.
If you are a shareholder and you did not register on arrival and you wish to vote, please make your way to the registration desk outside the room, and the staff from MUFG will be there to assist you. Please mark your voting intention for each resolution on your voting card, which will be collected at the conclusion of the meeting. Shareholders joining online will be able to cast their vote using the electronic voting card received when online registration is validated. To vote, click "Get Voting Card" within the online platform. You'll be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish to vote by clicking "For," "Against," or "Abstain" on the voting card. Once you've made that selection, please click "Submit Vote" on the bottom of the card to lodge your vote.
There will be an opportunity for shareholders to ask questions on each matter being put to our shareholders. Questions raised should relate directly to the matter being considered. Now, when I call for questions, can shareholders who are present in the room please raise your hand, and I will invite you to the front to the standing microphones that we have here. If you're not able to do that, we can bring a microphone to you. Please clearly state your name and whether you are a shareholder or a proxy holder before asking your question. Please wait until a microphone is provided to you before clearly stating your name and whether you are a shareholder or a proxy voter. Online attendees can submit questions by clicking the "Ask a Question" button on the virtual meeting platform.
Please note that online questions may be moderated or amalgamated together if we receive multiple questions on one topic. Re-election of Directors. We now move to the re-election of Directors. We have, as I said before, two Directors standing for re-election, Caroline Rainsford, who is retiring by rotation, and then Hamish Rumbold, who was appointed by the board in November 2025. As I previously mentioned, Robbie Tindall and I are both retiring at this annual meeting and will therefore each cease to be a Director of the company at the end of the meeting. Proxy voting for these resolutions will be shown on the presentation screen. We will now move to the first resolution, which is the re-election of Caroline Rainsford. Caroline Rainsford was appointed to The Warehouse Group Board in August 2022, following a year with the board as part of the Future Directors Program.
She is the Country Director for Google New Zealand, where she is responsible for driving overall revenue and business strategy, and she works closely with the government, with policy teams and business leaders to help New Zealand organizations grow and transform in the digital age. Prior to joining Google in 2017, Caroline held senior roles with Latitude Financial Services, which was formerly known as GE Capital, including Marketing and Product Director for New Zealand and Brand Director for Australia and New Zealand. Earlier in her career, she worked with Philips Royal Electronics in international markets across the Middle East, Turkey, and Africa. Carolyn also serves on the Auckland Art Gallery Toi o Tāmaki Advisory Committee, and she is here a member of The Warehouse Group's Health, Safety, and Wellbeing Committee and the People and Remuneration Committee. Proxy voting in respect of this resolution is shown on the presentation screen.
I'll now ask Carolyn to make a brief statement to the meeting. Caroline.
Thank you, Joan. Good morning, everyone. As Joan said, my name is Caroline Rainsford, and I really grew up in New Zealand with the warehouse stores playing an incredible part of my childhood. Having been born in 1982, the very same year that Sir Stephen Tindall opened the first warehouse store on the North Shore, I have very simply never experienced life without the red sheds. I can assure you that now, with four children under the age of 13, I am a frequent shopper most weekends, and it is a bigger part of my life than ever before.
My relationship with The Warehouse began at the very, very beginning of my career over 25 years ago, where I was a budding young sales rep selling consumer electronics to the then Noel Leeming and Bond and Bond stores before their acquisition in 2012. Since then, I have remained connected to The Warehouse Group in my various executive roles and feel very privileged to be addressing you today, seeking your support for my reappointment on the board of The Warehouse Group. My 25-year career, as Joan mentioned, has spanned many industries: consumer products, consumer and commercial finance, technology, and digital sectors across many countries around the world, but I've always found my way back to New Zealand. I have worked for leading brands such as Philips, GE Capital, and Latitude Financial Services.
As Joan mentioned, I now spend my days working as the Country Director for Google here in New Zealand, which I've been doing for the last eight years. I have the great privilege of working with many New Zealand businesses and New Zealand at large, helping them transform, grow brands internationally, and have thriving businesses in a world of AI and technology. My first term on the Warehouse Board has been defined by a deep commitment to our values and clear focus on executing the turnaround of this great New Zealand business that is operating in an environment of relentless change. The line between physical and digital has completely vanished, replaced by a single, seamless consumer journey.
Whilst I will always advocate for digital acceleration to keep pace with consumer demands, physical stores have never been more important as they act as the experiential touchpoint for our customers and cannot simply be replicated online. It also remains a key differentiator of The Warehouse Group's business in a highly, highly competitive world of global competition. Most importantly, my first term has cemented my passion for The Warehouse Group's business and the enormous turnaround opportunity we have. I still very much believe in this. We have an enormous amount of work to do, but the Management Team led by Mark, Steph, and team is one of the best that I work with in New Zealand. I believed in our very focused and disciplined turnaround plan that Mark has just outlined.
I'm incredibly excited to be able to continue my journey with the company and thank you for your support in doing so. Thank you.
Thank you very much, Caroline. Are there any questions on the re-election of Caroline Rainsford as a Director? There appear to be none. I now move that Caroline Rainsford be re-elected as a Director of the company. The poll on the re-election of Caroline Rainsford will be conducted at the end of formal business. We now move to the second resolution, which is the re-election of Hamish Rumbold. Hamish Rumbold is a Non-Executive Director with multi-sector expertise across key governance domains: customer experience, digital and data strategy, technology, transformation, cybersecurity, and risk and compliance. He is a governance professional and a graduate of the Australian Institute of Company Directors.
Hamish currently serves as a Non-Executive Director for House of Travel Holdings and for Livestock Improvement Corporation. He is also a Non-Executive Director and Chair of Peregrine Hold Co Limited, a majority private equity-owned FX remittance business trading as OrbitRemit. Hamish previously held general management and executive roles within New Zealand and Kiwibank. Hamish was appointed to The Warehouse Group board on the 19th of November as an Independent Non-Executive Directo r. Proxy voting in respect of this resolution is shown on the presentation screen, and I'll now ask Hamish to make a brief statement to the meeting. Hamish.
Thank you, Joan. [Foreign language] Thank you for the opportunity to introduce myself and share my background and skills that I bring to The Warehouse Group Board.
I am a passionate Kiwi who has lived and worked in New Zealand, the U.K., India, South America, and I graduated from the University of Auckland with a Bachelor of Commerce degree and a Bachelor of Property, plus ongoing development through many international global executive leadership programs. My career has focused on delivering commercial value through the use of customer experience, the use of technology and data across many industries, including retail. I started my life at Lion Nathan, then moved to Foodtown and Woolworths, and after a decade offshore working with companies like Sainsbury's, BP, and South America's largest multinational retailer, Cencosud, I returned to New Zealand to join Air New Zealand, initially leading the customer engagement team and their airports business, then overseeing their digital data and customer technology globally.
I later served as CEO of our New Zealand software engineering company across Australia and New Zealand, and most recently as Chief Digital and Technology Officer at Kiwibank for five years. During this time, I was an Independent Director on the Fidelity Life Board, appointed by the New Zealand Super Fund, and a member of the Prime Minister's Office Cybersecurity Advisory Committee. My wife and I also launched during that time here in New Zealand a B2B food service ordering platform, technology platform, now operating globally in New Zealand, Australia, U.K., and the U.S.A. In 2024, I exited my full-time executive life to focus on governance, aiming to impact many New Zealand businesses.
I currently serve, as Joan mentioned, as Non-Executive Director for House of Travel New Zealand and Australia, Livestock Improvement Corporation, and as Non-Executive and Chair of OrbitRemit across New Zealand and Australia, which is a New Zealand-born, now private equity-owned FX business. My personal ambition over my lifetime and career is to generate or help generate NZD 10 billion in market capitalization growth for both New Zealand and Australian companies and the resulting growth that drives employment, investor confidence, and national strength. This is why I'm excited to join The Warehouse Group Board. The Warehouse Group is such an integral part of the fabric of New Zealand, serving over 1.7 million customers every week and employing 10,000 team members nationwide. I have a deep personal connection, having used The Warehouse, Warehouse Stationery, and Noel Leeming in both my personal and business life.
There is, however, important work ahead, and I believe that my skills can help the team on the board and Mark and his team and The Warehouse Group drive success in New Zealand, ensuring long-term sustainable performance. As Joan mentioned, my multi-sector experience expands across critical governance domains, including technology, data, and AI, customer experience, risk management, cybersecurity, and transformation. Finally, I'm a graduate of the Australian Institute of Company Directors and have actively served on many subcommittees, including People and Remuneration, Mergers and Acquisition, Audit and Risk. I thank you for your time. I look forward to serving The Warehouse Group, prioritizing a hands-on approach and engaging directly with customers, the team members, and investors as we turn this business around. Thanks for your time.
Thank you, Hamish. Are there any questions on the re-election of Hamish Rumbold as a Director? We've got one here. Just wait.
Can you come up to the mic? That's great. Yeah.
Hello. My name is Emers Barge. I'm a shareholder. Welcome, Hamish. As it is, your name is Rumbold. You are a very bold man. The only thing I'm missing is I don't get his write-up over here in any of the handouts given to us, the reports and all that. Why is that so? Otherwise, I have no objection. I will definitely vote for you. I just wanted to know whether your write-up is missing over here. I don't have any write-ups for him.
I know. Look, that's our fault, if you like. These processes are often quite protracted at the end, where you have to go through and get all sorts of things ticked off before you appoint someone.
I think Silva, our deadline for the notice of meeting was the 31st of October. As we said, Hamish was appointed on the 19th of November. We are just delighted he is here. We had to pull him across the line and get him, but we have got him. Hopefully we have given you a very good background, and Hamish has added to that. We take your point. We do not like it to happen that way. We normally have the full CV or certainly a truncated CV in the notice of meeting when we are appointing, putting someone up to shareholders for their first re-election by shareholders. That did not happen this year, and we are very sorry for that. Hopefully we have convinced you we have got the right guy. Any other questions?
[Foreign language] , Joan. We have a question online regarding resolution two to re-elect Hamish Rumbold from Eva Quilding.
Hamish, with your expansive professional experience in New Zealand and abroad, do you think it's better to be a jack of all trades or to be a specialist? If the latter, what are you specialized in that can help turn around TWG?
Great question.
Thank you. Am I answering?
Yes, you are.
Thank you for the question. Great question. I think on a governance board, it is important to be able to contribute across all domains of the business, not just in your specialist area, but also have very specialist areas where you can contribute specifically. My specialist areas are customer experience, data, and technology.
Thank you. Any other questions in the room or online? There appear to be none. I now move that Hamish Rumbold be re-elected as a Director of the company.
The poll on the re-election of Hamish Rumbold will be conducted at the end of formal business. I'll now turn to the third and final resolution, Auditors' fees and expenses. PricewaterhouseCoopers are automatically reappointed as the Auditors of the company in accordance with the provisions of Section 207(t) of the Companies Act 1993. A resolution, however, is required in respect of their remuneration, namely to authorize the Directors to fix their remuneration. For the information of the shareholders and as disclosed in the 2025 annual report, the total fees paid to PricewaterhouseCoopers in the financial year ended 3rd of August 2025 were NZD 962,000, of which NZD 803,000 was in respect of auditing the 2025 annual financial statements of the group. Proxy voting in respect of this resolution is shown on the presentation screen.
Are there any questions relating to the resolution to authorize the Directors to fix the Auditors' fees and expenses? Any online, Lizzie?
No.
Thank you. Okay. There appear to be none. I now move that the Directors are authorized to fix the fees and expenses of the auditors for the ensuing year. The poll on authorizing the Directors to fix the Auditors' remuneration will be conducted along with the other resolutions next. Voting. I now declare the voting open on all items of business. I'll just remind you again of the voting procedure. All resolutions are ordinary resolutions which will be passed if approved by simple majority, that is, more than 50% of the votes of shareholders entitled to vote and voting in person or by proxy or representative. I remind you that you are voting on each separate resolution as detailed in the notice of meeting.
If you hold a proxy on behalf of a shareholder, you will need to cast the shareholders' votes in order for them to be counted. We intend to vote all discretionary proxies we have received in favor of these resolutions. Where a shareholder has completed the proxy form but has omitted the name of their proxy or where a shareholder's named proxy is not in attendance, I will act as that shareholder's proxy and will vote in accordance with that shareholder's express direction. Once voting is closed, all votes will be counted by the company share registrar and scrutinized by the company's auditor. The results of today's meeting will be released to NZX on completion of the verification of voting. I'm now going to open the meeting up for general discussion. Any shareholder or proxy attending the meeting in person or remotely is eligible to ask a question.
Please note that only shareholders and proxy holders are able to ask a question. Visitors to the meeting are not able to ask questions. For the shareholders present in the room, again, please raise your hand and I'll invite you to the front to one of the standing microphones or a microphone can be provided to you. Again, please clearly state your name and whether you're a shareholder or proxy holder before asking your question. If you're joining the meeting online and have a question, again, please select the Ask a Question tab, type your question into the field, and press Send. Your question will be immediately submitted. Are there any other matters that anybody would like to raise? Before we go to that, I think I've got some questions here that have been submitted earlier, Lizzie, that you want me to go through and address?
That's correct.
Thank you, Dame.
Thank you. The first question we received, or we received a couple of questions in relation to the size of the board and how many directors are appropriate given the size of our company. I would make the point that we actually reduced the size of the board from eight directors to seven directors last year. When Robbie and I step off the stage, we are down to six directors, but that is over to the incoming Chair to decide what sort of quota of directors we have. I will make the point that this is a very complex company with large scale and with a lot of challenges. The most important thing, of course, is having the right population of directors with the right skill mix, with the right experience to sit around that board table.
As you've seen, we've supplemented the existing directors that have been sitting here with Hamish's skills, which I'm sure you'll join me in confirming the fact that they're going to be very additive to the skill mix that we have. We do publish the skill mix in the annual report every year, so that's available for you to have a look at. As I said, we're down to a market cap of NZD 277 million, which I think is where the question is coming from, but we still have sales of NZD 3 million. We have 10,000 employees. As I said at the outset, this is a large scale, complex company with quite a few challenges. I certainly think that the level of directors that we've had has been appropriate in the past.
second question that we've got in advance online was a voice and concern regarding staff shortages at The Warehouse Hastings. We're a bit perplexed about that because we don't know of any staff shortages down there. We actually recruit, Ian, I think about 2,000 Christmas helpers at this time of year to assist us. We had 32 additional part-time team members down in Hastings supporting the existing staff. If anyone's had a less than positive experience, we're very, very sorry about that. We do try and make sure that the rosters are adequately purposed. I was going to say manned, but you can't say manned anymore. Adequately populated. We take that feedback on board. Ian is in charge of all our store operations, so I know he'll take that on board. Thank you for the question.
We have received a few questions in relation to the supply and sales of SodaStream. Some of you who came a little bit later to the meeting may have noticed some protesters at the gate. We understand that this group, which is the Palestinian Support Network of our Aotearoa Group, are concerned that SodaStream products are being manufactured in Israel. As you will all be aware, for those of you particularly who have a SodaStream in your fridge like I have, most large retailers stock SodaStream, and it is a product that is very much enjoyed by our customer base. We did go back to our suppliers of SodaStream, who are actually PepsiCo, and they have reassured us of the ethical and manufacturing processes that are used in producing SodaStream.
We do require all of our suppliers to meet our ethical sourcing policy, and that policy has been in place at The Warehouse since 2004. We've got those assurances from PepsiCo, and we do appreciate that people do have views on these issues. We also appreciate that our customers and our consumers certainly like SodaStream. I hope that's satisfied that question. The last question that we've received in advance is another sort of question that's raised with a little bit of a geopolitical bent. The question is asked if the company will commit to stop buying products from the U.S.A., and that's in reference to their participation in the Israeli-Gaza conflict. The answer is no, but we only source about 1.4% in terms of spend of our products from the U.S.A.
Of course, a much larger proportion comes from China, and we actually have about 16% of our spend is on New Zealand products. Those are the questions that we've received in advance. We will now ask the room if we have any questions here of a general nature. We have one here. Do come up to the front.
Grant Comesky, shareholder.
Welcome, Grant.
Actually, I've got two questions. The first one is about groceries. Nobody seems to have mentioned or I've read in the report anything about The Warehouse and groceries, which was going to be a big category, but you seem to have forgotten it.
We haven't forgotten it. I'll hand it over to Mark. Can we do the questions one at a time? Is that okay? Is that okay?
Our grocery, I think FMCG was up about 7% year in year, but I'm handing it over to you.
Yeah, thanks, Grant. It is definitely an important category for us. I mean, FMCG, we take food and non-food into grocery, just like a normal grocer. Like Joan says, about 27% of our business at the moment. It is an important category. It's probably the fastest growing. We're not native grocers. Part of it is that we're learning how to be a grocer. Some of that is in bread and milk and the frequency of all those things. We're having a review on that, but our customers are enjoying it, so we are looking at the category.
We can expect some growth in that area.
I can't tell you.
At the moment, I'm looking at all the categories to look at the profitability of each category and see whether we can grow, which ones we need to grow, which ones we need to shrink, which ones we need to make the business the most profitable style of business we can, and which is the most sustainable. Yeah, we're looking at grocery again seriously, yeah. I obviously can't comment because it's not public.
Right. My second question is about communication in general, that it seems now we only get one communication from the board each year saying that there's an annual general meeting, but nothing about what's happening. Could we ask for more regular communication, please?
Yeah, I guess our communications predominantly go out at the half year as well, Grant, that we obviously put out an interim report, and we rely on, I guess, media to put out our messages. Direct communication is obviously incredibly expensive. I think we used to, going back to the early days when I was on The Warehouse board the first time, I think we used to put a mailer out and do things by direct mail. I think that's become prohibitively expensive. I take your point, and I think we probably match most companies, most listed companies now in terms of our communication, but I take that point on board. Other questions? We have one here.
My name is James, shareholder.
Hi, James.
Yeah, it's third time I'm here. And then, yeah, a couple of questions. First, about the net profit margin. We talk about the gross margin.
We could talk about the cost of doing business. I asked you last year as well for the net profit margin. Achievable net profit margin, three or two or four, yeah, an idea about that?
I mean, we do not have guidance like that in the market, but what I can tell you is that our gross margin is about 32.2%, and our cost is about 32.2%. That is why at the moment we have got zero margin, which is why we made a loss or we made the NZD 1.3 million, which is not acceptable. That is why our target is to get to below 31% cost of doing business. That will take out about 1.5%-2%, and then we have got to get our gross margin up. If you look at Walmart, Walmart is probably around the three to four mark.
They've got a higher index into lower margin categories than what we would want. I think anything north of three is the right number for us. Yeah.
Okay. You mentioned that the trading market condition is still conservative at this stage. You still think so for the Christmas because we don't want to see over-discounted promotion, which will affect your margin.
Yes. I mean, you would have seen one of our competitors come out with their results recently, and you can see how tough one of the retail businesses in New Zealand that were considered doing really well is also struggling and talking about margin pressures. We're doing everything we can. We are seeing a level of buoyancy in the consumer coming back. It's been really tough.
I think we've also trained the consumer to hunt for a discount all the time, and that's also making things more difficult. What I can see is that customers are responding differently to our assortment and the way our stores. I don't know if everyone's been into stores recently, but we're really trying hard to change the experience with how the store looks and feels and flows. Customers are giving us amazing feedback from that. That's part of just the beginning of the staircase of the journey of our transformation and being more coordinated in store and our storytelling. We don't want to discount. I mean, that's the worst thing in retail is to discount your margin. We've obviously got to respond to the market conditions and what others are doing.
One thing you will know about me is that I'm a disciplined retailer about disciplined retail planning, and that's a massive focus for us. That's part of you'll start to see a lot more disciplined management of margin and stock going forward.
Okay. Regarding this 3% net profit margin, you recommend within a couple of years we can achieve that or?
Yeah, I can't give that yet.
Okay, thank you. Second question is about the market, the stock share, the share price. Four years ago, we were talking about NZD 4 per share. Now is NZD 0.80 or NZD 0.78, something like that. Any insights or comments for that or?
Yeah, I mean, if you look at our balance sheet, the biggest thing that's not valued on our balance sheet is our brands. I think what the market is seeing is they can't see the future.
While you have a forward PE and you trade above book, if you take the price, your market price divided by your book price, which is your net book value, you should be at two times your book. That is a good number. We are obviously trading one for one at the moment, which is generally an indication that the market cannot see a future for your brands. Our big job, myself and Steph and the team, is to build the storytelling up to show the market that our brands have future equity and future growth value. When that happens, generally what happens is the share price will follow that signal. I think we are tremendously undervalued. I mean, we have NZD 150 million worth of property, freehold property sitting on our balance sheet that is not valued at the right number.
That in itself is value that's sitting there that's not in our share price currently. I think as soon as the market starts to see signs that our margin recovery is there and we can stop making some of the mistakes and our cost of doing business will get back, our share price should follow that trend.
Thank you for that. Also, we noticed that this year The Warehouse Group was removed from the NZX 50, and then the share price had to drop from NZD 1 to NZD 0.80 due to the sell-off from the institutional fund things. They have to. Any plan we can move back to NZX 50 or?
Yeah, I mean, we definitely got to get back into the executive attack. One thing you'll know about me, I hate losing. The NZX 50 is our goal. I've got a personal ambition.
I want to be top 40, top 30. We got to walk before we run a little bit. It will not take a lot. It is who we got displaced by. I think we definitely could get back. Yeah.
Okay. Thank you, Mark.
Thank you very much, Jason. Those are excellent questions. Coralie.
Coralie Van Kempshire, hold on. I am curious about the venue. It looks like a very big new expensive building.
This predates my coming on the board. JJ, when did this extension go on?
I do not actually give you a date on that, Joan,
but it is quite old. Not as old as I am, but it is quite old.
Does The Warehouse own this or is it?
Yes, we do. Yeah.
Do you occupy all of it or are you subletting some of it out?
We are not subletting anything at the moment, are we? No.
This space here, what is this normally used?
Training area, predominantly, is it not? You're still using it for that? Yes.
Can you justify the capital outlay on this or the capital holding of it?
I think it would have appreciated, would it not? Steph? Yes. Yes.
You're occupying all of this complex?
Yes. Yes .
Than k you.
Thank you, Coralie. Thanks for always turning up. Welcome.
Richard Jenkins, shareholder. I've just got...
Hi, Richard.
Hi. Two questions. In the past, The Warehouse made a commitment to pay the living wage. Are you going to renew that?
I'm not aware that we ever made the commitment to pay the living wage. We pay the retailer wage. That's...
I was under the impression.
No. No. I think from memory, our store wages, and you'll correct me, have gone up 56% since 2018.
Corresponding inflation over that period is 19.9%. We think we've done pretty well. Obviously, we don't match all retailers, and some of them are paying the living wage, but that's because we employ 10,000 people, and many of our competitors employ many more. Our wages and salaries as a percentage of revenue are still running at 17%, which is very high compared to our competitors. I think, for example, Briscoe s is 13%-14%. We'd love to pay more, but it's got to be we try. That's one of the big things that the Leadership Team and the Board have to focus on is calibrating how we keep our people fairly paid, fairly remunerated, and balance all of the other things, which in what has been an incredibly difficult environment.
I would like The Warehouse to pay the living wage. Funny you mentioned Briscoe s.
That was my other comment. I'm a shareholder in Briscoe s. In 2015, The Warehouse and Briscoe s were both trading at about NZD 3 a share. Now, Briscoe s is over NZD 5, and we know The Warehouse is 80 cents .
Yeah, look, I would certainly acknowledge that Briscoe s is a very, very good operator, and we obviously keep a keen eye on our competition, but we're absolutely focused, as Mark has said all the way through his presentation, on getting back to where we belong, which is certainly improving our share in the Homewares area, which is high margin. We are not pleased or proud of being 80 cents. Believe me, every one of us anx every day about it. I think you've heard the new CEO and the changes that are being made, so just watch this space.
Okay, I'm watching. Good. Anything else in the room? We've got one here.
Hello, Barbara O'Connor, shareholder.
Hi, Barbara.
Two questions. One is about The Warehouse Group and the comment made earlier about sharpening the focus on retail fundamentals. When did that disappear, and how can the same board help sharpen it?
Yeah, look, I think that's a very fundamental question, and we've been through the history of what's happened over the last few years a lot and analyzed what we did sort of three or four years ago. I think for most of the people in the room who followed the stock, they know that we focused on an ecosystem strategy that we believed that with Amazon going into Australia, there was a massive threat, and we had to have a platform. We were told it was existentially important to us. If we're honest, we took our eye off the ball a little bit in terms of the store environment.
The retail fundamentals, which when JJ went back in as interim Group Chief Executive Officer in May 2024, he rolled up his sleeves, got on the bridge of the deck, and started pulling back to make sure that we got those retail fundamentals right, and Mark is doubling down on that.
I hope it's the right one this time. My second question is about one of your brands, which I don't seem to see here today except on this sheet of paper, and that's the Noel Leeming brand. I notice with interest that one of the areas that it claims to be really useful in is its tech solutions, and I quite like them given my age. With the customer focus, I went into one store, sorry, they're only here on Tuesday and Friday. Come back on Friday.
A simple notice on the desk saying, "We're only here Tuesday, Friday," would be quite useful. I drove to another one and waited there for the tech solutions. There was no saying, "Sorry, we're closed," on the... I eventually got served about five minutes later, "Sorry, they're out today. We won't be manning the desk."
I'm really sorry to hear of that experience, Barbara.
So was I.
Jason here?
Yep, there is.
Jason, do you want to answer that?
All I say is please put notices on to manage the consumer expectation.
I'm really sorry to hear about that experience. Maybe I'll catch up with you afterwards and get there.
Thank you.
Barbara, I'm a raving fan as well, but I tend to ring them, but they've been phenomenal, so I look forward to... Persevere. Any other questions in the room? We've got one. Carl.
A couple of points.
Just let everybody else know who you are first.
Yeah, I'm Carl from... I'm a shareholder, and I work for The Warehouse. Optics, I don't have an issue with the new Board of Directors because they're all qualified and all that, but the optics of removing Dame and Tindall from the Board.
I think most people actually look at the calibre of people rather than their titles or their surnames, and I'm just enormously positive about the calibre of the Board going forward, so you should have no concerns on that front.
As I said, I don't have a concern with the staff, but it's just the optics of removing the Tindall name from the Board of Directors, especially.
In regards to Noel Leeming, when there was a big old massive crash due to a bad Windows update, we had Noel Leeming come into all The Warehouse stores and fix our computer system so we were up and running while everyone else was down for days. It is a big advantage to us to have a tech company associated with us.
Awesome. Thank you, Carl. Well done.
Thank you.
Any other questions in the room? I know I have one online. Lizzie, do you want to read it out?
Thank you, Dame Joan. Yes, we have a question from Dave and Katrina Wilson. When The Warehouse Group shares were over NZD 3, I bought into The Warehouse.
A short time later, it was reported that The Warehouse had trouble with shipping deliveries due to COVID, and there were expenses occurring because of that, which would not be uncommon then, so I decided to run with that drawback. However, nothing was said about the loss in sales that were reported in the year.
Look, I think a lot of people had shared that sentiment about the share price a couple of years ago. The sales actually are not the issue, so sales back then were about NZD 3.2 billion compared to NZD 3 billion this year. We did experience shipping issues around the COVID time, as did most companies, but they are largely resolved as far as I understand.
The level of profitability, though, I think is the core of what you're getting at in your question, and that is, as we said right through this presentation, is just not acceptable. As Mark has said, it's the gross profit margin that remains under pressure and that we're addressing, and that we obviously know that we need to improve our bottom line profitability, and we're totally focused on doing that. Thank you for the question.
Thank you, Dame Joan. We have another question online from Edwin Stranahan. I am disappointed that your meeting venue is so inaccessible for some shareholders, especially older shareholders. I do not know how it is accessible by public transport. You did not advise how this could be done in your notice of meeting, and most companies are encouraging shareholders to use public transport.
Look, we've saved some money doing it here, and the people I canvassed before the meeting who are here are very happy with this as a venue. I take the point, but I don't actually know that there was public transport available to get to Alice Lee easily either. It is something that we do keep in mind. I apologize if it's proved too difficult for you, but I think as a venue, this has worked out fairly well from our perspective. Acknowledging the fact that almost anywhere that we've got a large enough venue to have an annual shareholders' meeting, there are some issues getting public transport, unless you have it in the center of the city, which is probably prohibitively expensive.
Thank you.
Next one.
A question from Gary Jarvis. Last year, I did not receive a shareholder discount day letter. Has this scheme been terminated?
I can't answer that question. Has it been terminated, our shareholder discount day? No. No, we've got them being waved in the audience here, so I'm not sure why you didn't receive one. Have we got the email details, or can we get in touch and make sure we've got the right address?
Yes, Joan, we will get the email details. I can confirm that if you're a shareholder in attendance in person today, you can collect one from the desk at the front, and we will be emailing all shareholders the discount letter.
Brilliant. Thanks, Lizzie. Next one.
A question from John White. It does relate to when you will push the button to scale on the grocery offering. Perhaps we've covered this already, but if you'd like to comment.
Mark, anything else to add?
No, I think I said it all previously.
Thank you.
Another question from Michael Coventry. What is the expected impact when IKEA begins trading here in New Zealand?
Mark, that's you as well.
I mean, I think any good competition makes you sharper, and in fact, what it's done to our teams has just made our teams sharper, focus on the categories that they're very strong at. Obviously, flat pack furniture is what they're known for, and they're a formidable business. I think we've taken a lot of inspiration from them, and we cheekily are going to give them some feedback, but in a good way, as a warehouse way. Yeah, we're looking at our categories even now. We've just been through some new reviews and looked at their product categories and where they're strong, and we're going after their price points. Remember, we've got 86 locations; they've got one.
We think that the Sylvia Park, where they're centered around, they're also conscious of the IKEA pull, and they're also wanting to get people into the center and back into Sylvia Park. There are a lot of people wanting us to win as well. We're definitely not asleep at the wheel. We'll have our own combative things to go after them.
Thank you. I believe we have a question in the room.
Okay, come up to the front, please.
Good morning, everyone. Name is Shauna Ng.
Shauna.
In the month of May, I happen to be in Botany. Warehouse, in-house brand, Market Kitchen coffee, selling at NZD 28 for two packs. Then you have Colombia Coffee, 500 grams, NZD 28 for two packs. Then you have Ferrero Rocher, T30 packing, marketing at retailing at NZD 17. Now, next door, PAK'nSAVE, NZD 10. There's a massive 70% difference.
Next, the main question is inventory management. Both had a very short lifespan of expiry in August. Why do you put a sale during the month of May, which is a very low season, whereas if you do it in December, during this time, and you can clear the goods even faster? If the goods are no sale, what happened? It's going to be a write-down. It's going to impact on your CODB. If you are pivoting towards FMCG, what are you going to do in the future to minimize this wastage? Thank you.
Very good question. You obviously know a bit about this. Mark.
Yeah, you've got some good insights, which is really to the question a little bit earlier of what we're struggling with is exactly that.
We grew grocery more like that we just responded to the customer's need for more and more, but we did not necessarily have a conclusive view of where we would end. I think what you are experiencing as some of our supply chain and the various different components, we are still catching up. We are learning on which areas to be good at and what areas we have to improve on. Your questions are spot on because if you do not sell it in the right period, you take a markdown and your gross margin is there. I mean, it is a difficult subject because I know how sensitive it is for everyone. Everyone wants the duopoly to go down and for us to win. There are also things that we have to strengthen and be good at in order to effectively win and compete.
Otherwise, we can't get the prices PAK'nSAVE have got, and we need to double the volumes. We need to do a whole bunch of things to make that true. I think there's still some work to do, and we're looking at it very closely. Yeah, I apologize for your experience. Yeah, there are some areas that we need to improve on.
Okay. More online?
Yes, thank you. We have a question again from Edwin Stranahan. I was surprised that your attention to your computer system problems were able to obtain such a large amount of savings. How much are you now spending on computer systems?
Mark, we've gone through the peak of our spend on replacing the legacy systems. I think we've spent about NZD 140 million from, well, up until about FY 2024 over that five-year period.
What are we doing now in terms of IT spend?
Yeah, I mean, I think what we did is, remember, this business was built up over 30 years with legacy systems that were fit for purpose for a moment in time. As you get complex, you have to have better systems and joined-up data, particularly in a world like what Hamish mentioned in his speech, is that AI and data is becoming the currency that people are competing with. I mean, you just have to look at Walmart's results. The majority of what they're actually making their profit on is actually synthetic digital money. It's got nothing to do with what they're selling as products. The world is changing, and we've got to have a more composite view on data and where data's set.
Whilst we've got through the fundamentals of a lot of our core spend, we have to transform one or two more systems, but they're more bolt-on systems than fundamental foundational systems, which we've spent, like Joan said, was the predominant piece of the money that was spent in the past. We haven't published that sort of number out there, Joan, so I wouldn't be comfortable saying a number, but it's not nowhere near what the past was, that's what I can tell you.
All right, thank you. We've got another one there, Lizzie.
Yes, another question from Edwin Stranahan. How many shareholders are at your meeting today? Dame Joan, I can confirm we have approximately 120 online and 100 in person.
Well done. Thank you, Lizzie.
Finally, a question online from John White asking, why can't you outperform Kmart?
We're trying.
Our pricing reset is certainly helping. Mark?
Okay, Joan, it was Joan.
Yes, it's John White, yes.
Joan, what I can tell you is I came from a business of 3,000 stores. We put down 300 stores a year. We were a value retailer that was effectively the Kmart of South Africa. What we've done is we took our eye off the ball on apparel and home, which is their two pillar categories. I think my personal view is that we gifted a lot to them, and that's my speciality, if you want to call it that, and it's fundamental to our side turnaround. Those two categories by themselves are over 50% of our turnover and probably 55% of our profit. They're fundamental to the point a little bit earlier, what do we have to concentrate on?
If we don't fix those two massive categories, the business won't get the dividends you all want. Part of that is fundamental. Kmart are good, but we're coming back, and we've got some plans. Carrie and the team, and we're working tirelessly to improve our merchandise, our trend, the wanted items, that surprise and delight. We've looked at our positioning of our pricing versus them. Not only them, but I think we've got a lot of amazing products in our stores. I mean, we've got a 403-pound sheet that you go to Farmers or Briscoe s, and it's NZD 289. Ours is NZD 69 for a 403-pound sheet. What we have worked, when I explained a little bit earlier in my speech, what is the problem? The problem is our storytelling in store. We've got a little bit confused.
What Kmart are very clear on is they're very clear on what you're there for and what the product stands for. Our job to do is to bring that clarity of offer, get our virtual merchandising right, and we'll come back. We've got the majority of the product. We've just got to coordinate it a bit better.
Well said, that's a great note to end on. We've exhausted the questions. Oh, Carl, we've got one more.
Yeah, this is kind of an operational thing. Carl again, shareholder and employee. In regards to all the new systems that we've got, we've now got to use our personal devices to get into them. Often, I have a serious problem getting authenticated to actually get into the system so that I can do my job.
I think you need to go and have a word with Shane after the meeting. We'll order a sandwich, and he'll sort you out.
Yeah.
Thanks, Carl. Okay. We've got one here. Right. This is the lucky last.
Okay, really last. Now, I have heard all these people complaining about The Warehouse Group and why it is performing so badly. Look at the state of affairs of the country and see the economy. Everything is going down. Warehouse is doing quite well. I appreciate your people. You have given a good, sterling performance, and you are capable of giving a better return. I always wish you all the best for the coming days. Thank you.
Thank you.
Thank you so much for that. That really is a good note to end on. Ladies and gentlemen, that concludes our discussion on the items of business.
Please ensure that you have cast your vote on all the resolutions. I'll now pause to allow you a little bit of time to finalize those voting forms. The voting, as I said earlier, will remain open for five minutes after the conclusion of the meeting. The results of these votes will be released to the stock exchange later today. MUFG are about to come round the room and collect the voting papers. Do I see them moving? Yes, I see them moving. Here they come. I thank you all for your attendance, and I now declare the meeting closed at 11:29 A.M. Whether you're here in person or online, I really appreciate your continued interest in the company. For those of you who are here in the room, we do have a morning tea over there.
Please come and join us for those refreshments and have a chat with the Birectors and the Leadership Team. I do hope you all stay safe and well, and I wish you and your families a very happy festive season and a prosperous new year. Thank you.