The Warehouse Group has reported a slight increase in sales for the first quarter of this fiscal year and announced it will cut costs by restructuring its head office roles.

The group recorded sales of $674.1 million, up 0.9 per cent as compared to the same period last year, citing low consumer confidence and high unemployment. 

The Warehouse sales rose 0.7 per cent to $389.0 million, with same-store sales also increasing 0.7 per cent. 

Warehouse Stationery sales rose 2.6 per cent to $52.2 million, while Noel Leeming reported sales of $230.7 million, up 0.7 per cent but with same-store sales down 1.6 per cent.

Average selling prices fell 2.4 per cent due to clearance activity, a shift toward grocery products and an intensely promotional market.

Online sales rose 8.2 per cent and accounted for 7 per cent of total sales, up from 6.5 per cent a year earlier, driven by Noel Leeming.

“Sales revenue and units sold are up, which is an encouraging sign,” said CEO Mark Stirton. 

“However, we’re not yet seeing the scale of full price home and apparel sales needed to materially improve margin performance at The Warehouse. 

“A warmer winter led to slower sell-through, resulting in increased clearance activity which also impacted the value perception of our new spring home and apparel ranges.”

Gross profit margins improved at Noel Leeming and Warehouse Stationery; however, The Warehouse gross profit margin remained under pressure.

The group’s gross profit margin for the year to date fell 40 basis points from last year.

The company announced a cost-reset program aimed at reducing the cost of doing business to below 31 per cent of sales. 

The plan includes a proposed restructure of head-office roles but will not affect frontline staff.

“These are difficult decisions, and we do not take proposed changes that impact our people lightly,” said Stirton.

“These changes are unfortunately essential to ensure our operating model is fit for purpose and to secure the future of The Warehouse Group as New Zealand’s leading value retailer.”

The company said it is exploring an expanded partnership with Tata Consultancy Services and will potentially co-source additional business areas.

The Warehouse Group said it remains focused on improving margins and expects the cost-reset programme to lower its cost base and support longer-term growth.