New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

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Warehouse Group Limited / Equity Bottom-Up

<ul><li>We expect an improvement in real retail spend in 2026 albeit at a more modest level than some investors may be expecting.</li><li>We forecast +1% to +2% annual growth in real core retail spend in the 12 months to June 2026, with further potential upside constrained by a soft labour market, weak net migration, and a subdued wealth effect.</li><li>The Warehouse Group (WHS) and Briscoes Group (BGP) have most to benefit from an improving NZ consumer spending backdrop.</li></ul>

We expect an improvement in real retail spend in 2026 albeit at a more modest level than some investors may be expecting.We forecast +1% to +2% annual growth in real core retail spend in the 12 months to June 2026, with further potential upside constrained by a soft labour market, weak net migration, and a subdued wealth effect.The Warehouse Group (WHS) and Briscoes Group (BGP) have most to benefit from an improving NZ consumer spending backdrop.

Retail Rundown What’s In Store For 2026

<ul><li>The Warehouse Group (WHS) has done it tough over the last three years, generating a cumulative operating profit (EBIT pre-IFRS-16) of NZ$91m from FY23 to FY25.</li><li>Kmart NZ delivered +2% sales growth, a c.43% gross margin and a c.13% EBIT margin in the 12-month period to June 2025, while The Warehouse (Red Sheds) made its first operating-profit loss in the 12-month period to July 2025.</li><li>We only expect WHS to be able to return to a 2% operating margin, based on a 33% gross margin and getting to 31% CODB as a percentage of sales.</li></ul>

The Warehouse Group (WHS) has done it tough over the last three years, generating a cumulative operating profit (EBIT pre-IFRS-16) of NZ$91m from FY23 to FY25.Kmart NZ delivered +2% sales growth, a c.43% gross margin and a c.13% EBIT margin in the 12-month period to June 2025, while The Warehouse (Red Sheds) made its first operating-profit loss in the 12-month period to July 2025.We only expect WHS to be able to return to a 2% operating margin, based on a 33% gross margin and getting to 31% CODB as a percentage of sales.

The Warehouse Group Tale of Two Discount Retailers

<ul><li>The Warehouse Group’s 1Q26 update continued the challenging trading conditions NZ retailers have faced over the past 12–24 months.</li><li>WHS has sharply refocused on its cost base, targeting a more sustainable 31% of sales for its cost of doing business (CODB) through both: (1) head office cost reduction; and (2) top-line growth.</li><li>Meanwhile, near-term earnings risk remains negatively skewed: (1) promotional intensity is rising for Black Friday and Christmas; (2) IKEA opens in December; and (3) competitors continue to gain share.</li></ul>

The Warehouse Group’s 1Q26 update continued the challenging trading conditions NZ retailers have faced over the past 12–24 months.WHS has sharply refocused on its cost base, targeting a more sustainable 31% of sales for its cost of doing business (CODB) through both: (1) head office cost reduction; and (2) top-line growth.Meanwhile, near-term earnings risk remains negatively skewed: (1) promotional intensity is rising for Black Friday and Christmas; (2) IKEA opens in December; and (3) competitors continue to gain share.

The Warehouse Group 1Q26 Trading Update—No New Stock

<ul><li>The Warehouse Group (WHS)'s broadly breakeven FY25 result was largely as expected but is still disappointing in light of its NZ$3.1bn of sales and almost NZ$1bn of gross profit.</li><li>In the meantime, we think FY26 will be another challenging year: while domestic consumer spending is showing signs of stabilisation, gross margins remain under pressure, and competitive tensions will rise with the arrival of IKEA in December 2025.</li><li>We recognise that the leverage in this business is significant, but continue to view the near-term risk-reward as skewed to the downside.</li></ul>

The Warehouse Group (WHS)'s broadly breakeven FY25 result was largely as expected but is still disappointing in light of its NZ$3.1bn of sales and almost NZ$1bn of gross profit.In the meantime, we think FY26 will be another challenging year: while domestic consumer spending is showing signs of stabilisation, gross margins remain under pressure, and competitive tensions will rise with the arrival of IKEA in December 2025.We recognise that the leverage in this business is significant, but continue to view the near-term risk-reward as skewed to the downside.

The Warehouse Group FY25 Result—Big Box, Small Profit

<ul><li>The Warehouse Group (WHS) has issued another downgrade to its FY25 EBIT guidance, expecting to be EBIT breakeven at the mid-point of its revised range, implying a significant loss in 2H25.</li><li>The consumer environment remains challenging with elevated promotional activity, and IKEA's entry will coincide with the key Christmas trading period, presenting challenges for WHS.</li><li>Despite expected EBIT losses, WHS is unlikely to breach its debt covenants and is expected to maintain a positive free cash flow in FY25.</li></ul>

The Warehouse Group (WHS) has issued another downgrade to its FY25 EBIT guidance, expecting to be EBIT breakeven at the mid-point of its revised range, implying a significant loss in 2H25.The consumer environment remains challenging with elevated promotional activity, and IKEA's entry will coincide with the key Christmas trading period, presenting challenges for WHS.Despite expected EBIT losses, WHS is unlikely to breach its debt covenants and is expected to maintain a positive free cash flow in FY25.

New Zealand

The Warehouse Group Limited operates general merchandise and stationery supply retail stores throughout New Zealand.

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Warehouse Group Limited (WHS NZ)

Retail Rundown What’s In Store For 2026

We forecast +1% to +2% annual growth in real core retail spend in the 12 months to June 2026, with further potential upside constrained by a soft...

Forsyth Barr

The Warehouse Group Tale of Two Discount Retailers

The Warehouse Group (WHS) has done it tough over the last three years, generating a cumulative operating profit (EBIT pre-IFRS-16) of NZ$91m from...

Forsyth Barr

The Warehouse Group 1Q26 Trading Update—No New Stock

The Warehouse Group’s 1Q26 update continued the challenging trading conditions NZ retailers have faced over the past 12–24 months. WHS has sharply...

Forsyth Barr

The Warehouse Group FY25 Result—Big Box, Small Profit

The Warehouse Group (WHS)'s broadly breakeven FY25 result was largely as expected but is still disappointing in light of its NZ$3.1bn of sales and...

Forsyth Barr

The Warehouse Group A Year in the Red

The Warehouse Group (WHS) has issued another downgrade to its FY25 EBIT guidance, expecting to be EBIT breakeven at the mid-point of its revised...

Forsyth Barr

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