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Warehouse whittles down divisions in bid to cut costs

Tuesday 10th January 2017

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Warehouse Group, which issued a profit warning in the run-up to the key Christmas trading period, will trim down its organisational structure in a bid to cut costs, bundling its stationery and 'Red Sheds' into one division and its Noel Leeming and Torpedo7 groups into another. 

The country's biggest listed retailer wants to strip out "significant cost" by cutting duplication across the groups, though it won't provide details until its first-half result is announced in March. The new structure will see the 'Red Sheds' and stationery division led by Pejman Okhavat, currently the stationery and Torpedo7 chief, while Noel Leeming boss Tim Edwards will head the Noel Leeming and Torpedo7 unit. Simon Turner, who's been in charge of Warehouse's flagship 'Red Sheds', will leave the business. 

"Changes will focus primarily on simplification to reduce complexities, drive efficiencies, and increase business agility, while removing significant cost," chief executive Nick Grayston said in a statement. "The changes are designed to drive an improvement in financial performance and generate greater customer relevance as customer needs change and competition increases." 

Warehouse didn't say whether the new finance division will be affected. The finance unit, which was launched in 2015 offering credit cards, insurance products and a pre-paid mobile brand, is expected to face a writedown in goodwill in the first-half accounts, and chair Joan Withers told shareholders last year the board was reviewing the outlook for it to break even in 2018. 

Auckland-based Warehouse spent hundreds of millions of dollars overhauling its outlets and buying new businesses to drive future growth under the leadership of former CEO Mark Powell who Grayston replaced in late 2015. That had followed a period of underinvestment and sales decline in the late 2000s.

Last year the retailer embarked on a three-year plan to introduce new technology and use the company's scale to mine customer data for personalised offers, while at the same time focusing on the bottom line by lowering the cost of goods sold with a broader range of supply deals, reshaping some store layouts and tighter inventory control. 

The shares last traded at $2.81, and have gained 14 percent over the past 12 months. 

BusinessDesk.co.nz

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