The Warehouse Group Limited

Group sales were just over $3 billion, down 1.9% year over year, though this included the extra trading week in FY25; on a comparable 52-week basis sales were down 0.2% and same-store sales were up 0.4%. Gross margin increased 40 basis points to 32.6%, while cost of doing business fell $29.8 million, or 3%, to 31.8% of sales. Operating profit rose to $22.6 million from $1.3 million, adjusted NPAT improved to $13.5 million, and reported NPAT was $11.2 million versus a $2.8 million loss in FY25. On the balance sheet, operating cash flow was $194 million, free cash flow was $79 million, and net debt ended at $17 million. For FY27, management said first-8-weeks trading was encouraging, with group sales broadly in line with the prior year and margin ahead; no formal financial guidance was given, but they said cost growth should be below inflation and capex should be higher than FY26 while still below FY21-FY23 levels.

CEO Mark Stirton said FY26 was still a difficult consumer environment, but the business focused on what it could control: value, ranges, execution, cost, and working capital. He emphasized that the team rebuilt retail fundamentals across plan/buy, move, and sell, with better inventory productivity, a simplified grocery proposition, supply-chain work, and store investments all aimed at stronger customer experience and share gains. His tone was cautiously upbeat: he said the fourth quarter showed traction, the turnaround is “just the start of the next chapter,” and the company is preparing to win back share rather than waiting for an economic recovery.

CFO Stefan Knight highlighted the quality of the earnings improvement: gross margin rose to 32.6%, CODB fell to 31.8% of sales, and operating margin improved to 0.7%. He broke out the cost reset as a $29.8 million reduction, including $21.9 million lower support-office costs, $6.9 million lower employee expenses, $12.6 million lower IT costs, and $9.1 million less depreciation and amortization; he also noted bank interest fell to $2.7 million, down 60%. On working capital, closing inventory fell $37.9 million to $439 million, stock turn improved to 4.7x from 4.6x, aged inventory was 21.8% of inventory versus 23.1%, and inventory provisions increased to $18.9 million. He said FY27 capex will be higher than FY26 but still below the long-run highs, and that cost growth should be slower than inflation rather than declining further.

Analysts focused on whether the Q4 gross-margin rebound in The Warehouse could be sustained, how far cost of doing business can fall, and how Noel Leeming can regain top-line growth and market share against competitors like JB Hi-Fi and PB Tech. Management said the gross-margin lift came from a mix of better category performance, less aged-stock clearance, more full-price selling, and a shift toward a more focused grocery top-up model, but they would not quantify a further self-help margin target. On costs, Stefan Knight said getting CODB below 31% of sales is a medium-term aspiration, not an FY27 target. On Noel Leeming, Mark Stirton said the plan includes store-environment upgrades, a younger look and feel, stronger focus on smaller audio-type categories, and more store openings over time, while John Journee said the intent is to return to store growth, subject to site selection and economics.