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) 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>Briscoes Group (BGP) reported 3Q26 sales down -2% year on year as the company pulled back on promotional activity to protect gross margins.</li><li>BGP reiterated its guidance of NPAT of NZ$60m for FY26; albeit we think performance needs to improve in 4Q26 to achieve this target, and there may be some downside risk to earnings with the arrival of IKEA in December and continued promotional pricing pressure.</li><li>Trading on a 12-month forward PE of ~19x on our revised estimates, we continue to view the risk-reward as skewed to the downside.</li></ul>

Briscoes Group (BGP) reported 3Q26 sales down -2% year on year as the company pulled back on promotional activity to protect gross margins.BGP reiterated its guidance of NPAT of NZ$60m for FY26; albeit we think performance needs to improve in 4Q26 to achieve this target, and there may be some downside risk to earnings with the arrival of IKEA in December and continued promotional pricing pressure.Trading on a 12-month forward PE of ~19x on our revised estimates, we continue to view the risk-reward as skewed to the downside.

Briscoe Group 3Q26 Trading Update—Balancing Act

<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

Thematic (Sector/Industry)

<ul><li>After a challenging few years for NZX-listed retailers, we are starting to see signs that the worst may be over.</li><li>Australian retailers that reported in August indicated that the consumer backdrop has improved sequentially throughout 2025 in New Zealand.</li><li>For the upcoming September reporting season, we will be looking for updates on recent trading, promotional pricing activity, cost control, and capital management.</li></ul>

After a challenging few years for NZX-listed retailers, we are starting to see signs that the worst may be over.Australian retailers that reported in August indicated that the consumer backdrop has improved sequentially throughout 2025 in New Zealand.For the upcoming September reporting season, we will be looking for updates on recent trading, promotional pricing activity, cost control, and capital management.

Retail Sector Checking Out Reporting Season

Netherlands

IKEA of Sweden AB retails home and office furnishing products. The Company offers furniture, home and kitchen appliances, lighting, textile, carpets, decoration, and other products. IKEA of Sweden serves customers worldwide.

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IKEA of Sweden AB (4168877Z SS)

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

Briscoe Group 3Q26 Trading Update—Balancing Act

Briscoes Group (BGP) reported 3Q26 sales down -2% year on year as the company pulled back on promotional activity to protect gross margins.

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

Retail Sector Checking Out Reporting Season

Australian retailers that reported in August indicated that the consumer backdrop has improved sequentially throughout 2025 in New Zealand.

Forsyth Barr

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