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.

Equity Bottom-Up

Warehouse Group Limited / Equity Bottom-Up

<ul><li>The Warehouse Group (WHS) reported 1H26 pre-IFRS EBIT of NZ$26.9m, +17% ahead of our forecasts.</li><li>Sales in 2Q26 (the important Christmas quarter) were down -0.1% on the prior year and -2.4% lower than our expectations.</li><li>The rebasing of CODB should insulate WHS's profitability outlook in 2H26. NEUTRAL.</li></ul>

The Warehouse Group (WHS) reported 1H26 pre-IFRS EBIT of NZ$26.9m, +17% ahead of our forecasts.Sales in 2Q26 (the important Christmas quarter) were down -0.1% on the prior year and -2.4% lower than our expectations.The rebasing of CODB should insulate WHS's profitability outlook in 2H26. NEUTRAL.

The Warehouse Group (WHS) - 1H26 Result Initial Impressions

<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

Thematic (Sector/Industry)

<ul><li>NZ retailers sourcing from China could benefit from excess manufacturing capacity and lower input costs.</li><li>A -1% reduction in China sourcing costs could increase sector gross profit dollars between +0.2% to +1.1%.</li><li>KMD Brands is better positioned to mitigate tariff-related headwinds than initially anticipated.</li></ul>

NZ retailers sourcing from China could benefit from excess manufacturing capacity and lower input costs.A -1% reduction in China sourcing costs could increase sector gross profit dollars between +0.2% to +1.1%.KMD Brands is better positioned to mitigate tariff-related headwinds than initially anticipated.

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)

The Warehouse Group (WHS) - 1H26 Result Initial Impressions

The Warehouse Group (WHS) reported 1H26 pre-IFRS EBIT of NZ$26.9m, +17% ahead of our forecasts. Sales in 2Q26 (the important Christmas quarter)...

Forsyth Barr

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

Retail Rundown - Getting to the Source

NZ retailers sourcing from China could benefit from excess manufacturing capacity and lower input costs. A -1% reduction in China sourcing costs...

Forsyth Barr

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