Tēnā koutou, and good morning, everyone. Welcome to The Warehouse Group's FY26 Interim Results Presentation.

Thank you for joining us today. I'm John Journee.

It's a privilege to be speaking with you as the first time as Chair of The Warehouse Group. Joining me today are Mark Stirton, our Group Chief Executive Officer, and Steph Knight, our Group Chief Financial Officer.

I will start with an update of our first half, and then hand to Mark to step through the group's performance and progress. Steph will then take you through the financial detail, and Mark will return at the end of the talk to talk about the second half of the year.

As always, there will be an opportunity to ask questions at the end of the presentation. From the board's perspective, the group is on the right path, and we are seeing execution and proof.

This progress has been delivered in an extremely challenging retail environment with volatile macroeconomic conditions. In these circumstances, the group delivered a solid result for the first half: holding sales, reducing costs, and improving profitability.

Sales were $1.6 billion, up 0.3% on the prior-year half. Gross profit was $520.5 million, down slightly on the prior period with a gross margin of 32.3%.

Operating profit improved to $26.9 million, up 37.7% on FY25 H1, reflecting tighter cost control. Most of our new management team were in place by the start of quarter one.

They have delivered a leaner operating model, and have made progress reestablishing the retail fundamentals, which Mark will cover shortly. I want to acknowledge the hard work of our team members across the business, delivering progress during significant change.

There is more work to do to restore sustainable returns, and realize the potential of our brands. Looking ahead at the tight economic conditions, and now with increased uncertainty from the international conflict in the Middle East, our turnaround will take time.

Given the half-year result and the level of economic uncertainty, the board has made the decision not to declare an interim dividend. I know this will be disappointing for our shareholders.

I want to assure you that the board and management are aligned and taking action to rebuild shareholder value quickly, and return the group to paying dividends. I sincerely thank our shareholders for their patience and ongoing support.

I will now hand over to Mark.

Thank you, John, and good morning, everyone. I'm Mark Stirton, the Group Chief Executive Officer.

As John has outlined, we are making progress, but it is happening in a tough environment. I will step through what we are seeing in the market, what the group achieved in the first half, and the work underway to strengthen the business.

I want to spend a moment looking back at the macro conditions during the first half of the financial year. By January, we began to see some early signs of improving consumer confidence.

For the first time in four years, more people felt it was a good time to buy a major household item, and 55% of consumers describe their financial position as comfortable. These were the first indicators that retail spending might start to increase in 2026.

That said, retail spending in January decreased 1.1% due to the severe weather events that disrupted parts of the country. At the same time, inflation has remained high, sitting at just over 3%.

That pressure was being felt most sharply through everyday essentials, particularly food and petrol. Unemployment had reached a 10-year high in December, and GDP growth remains muted.

While confidence was improving, many households were still cautious, focused on repaying debt, saving where they could, and prioritizing basic needs over discretionary spending. Like all businesses, we are focusing on our ability to respond quickly as conditions change, and I will talk to the current climate at the end of the presentation.

Despite a volatile environment, we delivered a solid result in the first half with disciplined cost control starting to flow through to improve profitability. One of the more positive aspects of the first half was the trading performance across all brands and stores.

Warehouse Stationery delivered a standout result with sales, margin, and operating profit all up on the prior period. As our smallest brand, it has been the fastest to begin turning around.

Our focus now is on applying those same learnings at scale in The Warehouse as we continue the broader turnaround. Noel Leeming delivered a strong result in an intensely competitive market.

Operating profit for the half exceeded the full-year result in FY25, which is a meaningful step forward. At The Warehouse, customers are responding well to the changes we have made in our stores and across our ranges.

Foot traffic and conversion were both up again, supported by new ranges, better pricing, and ongoing visual merchandising improvements. As newer ranges landed in the second quarter, we relied less on discounting, and delivered higher levels of full-price sales.

The Warehouse held its number-one position in the market for toys, and Health and Beauty continued to grow, an increasingly important category for us. Across all three brands, trading was strong during the main summer retail events, including Black Friday, Christmas, and back-to-school.

Underpinning all of this is a new leaner operating model and a culture of cost control. This will allow us to deliver better value for customers over the long term and improve profitability.

None of these highlights would be possible without our people, and I want to acknowledge our 10,000-plus team members across the country. Their work and commitment are making a real difference as we reset the business.

We are making good headway on our retail fundamentals. This is the practical work that supports margin improvement at The Warehouse and the broader turnaround across how we plan, buy, move product, and sell in store.

In merchandise planning and buying, a new strategy and governance model is now in place. This is improving decisions and giving us better control over ranges, margin, and inventory.

We've brought in key talent and broadened our supplier base, and we're starting to see better planning discipline and alignment between product pricing and customer demand. Turning to supply chain, we now have clear leadership in place at the executive level.

We've changed our shipping supplier, improving visibility, control, and cost, and a broader review is underway to further improve our cost to serve over time. We have improved delivery windows and helped remove some complexity from how our containers move.

Finally, sell. Today, I'm excited to announce that we'll be opening a Warehouse and a Noel Leeming in Mangawhai.

This will be the first new The Warehouse store since Wānaka in 2023. Our store network is our key strength.

More than 85% of New Zealanders live within 20 minutes drive of one of our stores, and our stores are central to how we will serve communities and deliver value. Alongside this, we are continuing to invest in store experience, including visual merchandising upgrades, and planning is underway for a new flagship store format.

We are invigorating our brand to drive reappraisal and preference, and actively testing our paid media to find the best value and performance while expanding our own retail media strategy. This work is about fixing the core.

It takes time, but it strengthens execution and will support better performance at The Warehouse over the long term. Even in a challenging period for the business, we have stayed true to our heritage and the communities we serve.

Through The Warehouse Red Bag, we raised close to $700,000 to support local communities through our stores and families in need through our charity partners. I want to recognize the team at The Warehouse Pāpāmoa, who used their Red Bag funds to deliver food, water, and sunblock directly to first responders at the cordon during the Mount Maunganui landslides.

Over Christmas, our annual Be the Joy campaign raised more than $250,000 and collected thousands of gifts for families in need thanks to the generosity of our customers. We were delighted to welcome Santa to 19 of our stores, giving families the opportunity to create special memories.

To support our busiest trading period, we employed an additional 1,000 team members in local communities across the country. We continued to look after our environment with scope 1 and 2 emissions down 80% on last year.

We're proud that 183 of our sites are now powered by Lodestone Energy solar farms. We diverted 79% of our operational waste from landfills, and increased the amount of post-consumer waste being diverted.

69% of our private label sales now use sustainable packaging, continuing a steady improvement year-on-year. Doing good remains an important part of who we are as a business as we look ahead.

I will now hand over to Steph to take you through our financial performance in more detail.

Thanks, Mark, and good morning, everyone. I'll start with our overall group performance before expanding on each area of the income statement.

As mentioned, sales for the half were $1.6 billion, up 0.3% on the prior period. Due to the 53-week financial year we had last year, this half falls a week later compared to FY25 H1.

Throughout the result, we will refer to like-for-like sales, which compares 26 weeks ending 1 February 2026 with the 26 weeks ending the 2nd of February 2025, as opposed to the reported prior half year ending 1 week earlier on the 26th of January 2025. At a group level, like-for-like same-store sales increased 0.5%, driven by unit growth, but offset by lower average selling prices.

Group gross profit margin was compressed by 20 basis points across the half, with lower sales in high-margin categories in The Warehouse and partially offset by strong growth in Warehouse Stationery, our highest margin brand. Our half was a story of two quarters.

In Q1, gross profit margin was down 80 basis points due to category mix and clearance. This recovered in Q2 with gross profit margin up 30 basis points with higher levels of full-price sales.

Our cost reset program is gaining traction, with cost of doing business down 1.7% and down 70 basis points as a percentage of sales, and I'll go through the main drivers shortly. Our cost savings supported strong growth in operating profit, up 38% to $27 million, compared to $20 million last half year.

Looking at the two quarters of the half, Q1 delivered sales growth of 0.9% and an 80 basis point decline in gross profit margin, with lower sales growth in high-margin categories and higher clearance activity of winter stock in The Warehouse. Q2 improved, with flat sales and gross profit margin up 30 basis points.

Warehouse Stationery delivered exceptionally strong sales growth and higher margins, and Noel Leeming margins grew with sales in computers, whiteware, and services. These improvements were partially offset by softer sales in high-margin categories in The Warehouse, like home and in apparel.

On to The Warehouse. Sales increased 0.5% with major trading events like Black Friday, Christmas, and Boxing Day performing well.

We note that January sales were impacted by the severe weather events across the country. Like-for-like same-store sales increased 1.2% with store traffic and conversion up.

Total units sold increased 1.7%, while average sales prices decreased 1.9%. Sales growth in FMCG continues, and led by our growing Health and Beauty category with sales up 3.7%.

The Warehouse also held its number-one position in the market for toys. Gross profit margin was disappointing in the half, decreasing 110 basis points, but this was quite different between the quarters.

Margin in Q1 was impacted by higher clearance and higher freight costs. Margin in Q2 improved with higher full-price sales.

The Warehouse brand costs were kept well below the rate of inflation, but still increased 1.6%, driven by increased DC costs and store labor. However, group overheads remained too high and continue to suppress operating profit, which decreased to $9.1 million, down from $12.5 million in the prior period.

Unfortunately, our Central Wellington store closed in May 2025, and we look forward to growing our footprint again with Mangawhai. As Mark said, growing margin in The Warehouse, our largest brand contributing almost 60% of group sales, is key to improving our overall financial performance, and we're making progress.

Foot traffic is up, with more than 1.5 million New Zealanders through our doors every week, a huge endorsement of our brand. We're seeing progress in the key categories we need to win.

In home, units were up 4.2%, a pleasing result in an increasingly competitive environment. Apparel delivered good ASP growth and less clearance.

Inventory management improved, with stock on hand down 10%, better stock turn, and lower aged inventory. We've improved margin in FMCG by increasing Health and Beauty sales and optimizing the grocery offering.

However, we still have work to do to turn this brand around to deliver meaningful financial performance. Mark covered a number of changes currently underway, and we note our most critical success factors are improving the home and apparel offering with new merchant processes and sourcing changes to improve execution and reduce clearance; also improving our supply chain to reduce costs and boost efficiency; and also to reinvigorate our brands to increase customer reappraisal.

On to Warehouse Stationery: the standout performer, with sales up 5.7% and strong growth across all categories. Sales growth was impacted by the inclusion of the last week of January, which is the biggest week of back-to-school trade, whereas that week occurred in the second half of FY25.

Like-for-like same-store sales increased 1.8% with increased foot traffic and conversion. New ranges, good stock control, price resets, and lower clearance has led to gross profit growing faster than sales, delivering excellent gross profit margin growth of 170 basis points back to FY23 levels.

Warehouse Stationery opened a new store on Tory Street in Wellington and moved the Sylvia Park store inside The Warehouse Sylvia Park to create a store-within-a-store. In Noel Leeming, sales declined 1.2%.

This decline reflects a strong comparative period with elevated Flybuys redemption sales as the program closed. Lower store sales were offset by very strong online sales, up 14%, with strong category sales growth in cellular, computers, and whiteware.

Noel Leeming's focus on strengthening profitability delivered 90 basis points growth in gross profit margin. Combined with brand and overhead cost control, Noel Leeming achieved an operating profit of $13 million, up 52%, and higher than FY25 full year: a really great outcome in a highly competitive market.

In November 2025, we announced our cost reset program and our aim to reduce cost of doing business to less than 31% of sales. We're pleased to have made significant progress, with cost of doing business decreasing 1.7% to 30.6% of sales.

It is important to note that due to the seasonality of sales in H1, cost of doing business as a percentage of sales is always lower in H1 and is expected to normalize in the second half. Looking at the top graph by category, employee expenses increased slightly, including increases in store and DC labor.

This was offset with a 10% reduction in Store Support Office labor. Depreciation decreased 10% through controlled capital spend.

Other income and expenses decreased 5.7%, primarily from savings in IT running costs and SaaS spend, and lower store costs. We've also increased revenue from our retail media business, Market Media.

Brand costs increased 1.3%, albeit lower than inflation. Within this, distribution costs increased 5.5%.

The changes to our supply chain I mentioned earlier are expected to reduce these distribution costs going forward. We continue to reduce our Store Support Office costs, down 8% in this half, following our 8% reduction in FY25.

The full effect of the cost reset program, including the recent SSO restructure and TCS arrangements, is not expected to be fully realized until FY27. Brand profit, which is all brand profits after brand CODB and before SSO costs and depreciation, decreased 3.3% compared to FY25 H1.

This was caused by the small decrease in gross profit and the marginal increase in brand cost of doing business. However, overall group operating profit was up 38% to $27 million, driven by the disciplined cost control and lower depreciation I just outlined.

Net debt improved slightly from FY25 full year of $96 million to $93 million as at FY26 half year. Net debt was impacted by the balance date timing, which includes large month-end pay runs in the half that were not in the prior half.

Normalizing for this timing, FY26 H1 would have been in a net cash position of $45 million, compared to $19 million in the prior half. Throughout the period, average daily bank borrowings decreased $52 million compared to the prior period, which combined with a reduction in interest rates resulted in 63% lower interest cost.

Notwithstanding the reduction in operating cash flows due to the timing of the half-year end, well-managed capital expenditure delivered positive free cash flow of $3.1 million. We've reduced our bank facilities in the half year after elevated facilities were put in place during COVID, which are no longer required.

Available liquidity was $207 million, comprising of $300 million available bank facilities and $93 million net debt. All debt covenant criteria were met over the half.

Moving on to inventory. Inventory decreased $26 million, or 4.7%, compared to this time last year.

Group inventory on hand was down 8%, offset by higher levels of goods in transit, which were up 19%. We continue to improve stock performance, with weighted average stock turn of 4.7 times, demonstrating our focus on stock turns and sell-through rates, and aged inventory of 16%.

The clearing of higher aged inventory on hand at FY25 year-end did impact FY26 H1 margins, particularly in the first quarter. We have good stock health, with 76% of group inventory on hand in continuity product.

There is still work to do over the next 12 months to deal with aged inventory as we aim to balance pressure on margins. Looking at our project spend, the level of project expenditure has remained low and finished at $9 million for the half, compared to spend of $9 million in H1 last year and $50 million in H1 of FY24.

We have reduced spend on IT systems and digital projects and have increased spend on store developments and store improvements to improve our customer experience. Looking forward, project expenditure is expected to be modest, and we will prioritize store development.

With that, I'll hand you back to Mark, who will share our view of the year ahead.

Thanks, Steph. Before we move to questions, I want to briefly look ahead to the second half.

In the first 6 weeks of H2, sales were down 0.2% compared to the same period last year, reflecting a competitive and uncertain environment. Our focus for the rest of FY26 is clear: we are prioritizing what is in our control and continuing to work to turn around our performance.

This includes driving margin recovery in The Warehouse, further reductions in overhead costs, tighter inventory management to unlock working capital, and disciplined capital expenditure, along with store growth, new product ranges, and enhancing the customer experience. That said, we are entering the second half cautiously, considering the geopolitical environment and broader economic conditions.

The international conflict has created further uncertainty for New Zealanders. Rising fuel prices and potential disruption along with congestion across key shipping routes are expected to push freight costs higher in the period ahead.

While the full impact on supply chain and consumers remains uncertain, we are closely monitoring conditions with planning underway. We are working with all our external stakeholders to seek to mitigate and manage these pressures as the situation evolves.

In this environment, the mission doesn't change at The Warehouse: we continue to strive to deliver value for Kiwis every day. In closing, I want to thank our customers and our shareholders as we stay focused on fixing the core of the business and improving performance over time.

We will provide an FY26 Q3 trading update on the 15th of May, 2026, and report our FY26 annual results on the 24th of September, 2026. Thank you very much.

Oh, thanks Mark and Stefan. I might just start with a couple of questions on your outlook commentary.

You able to provide any colour on how sales have tracked over the past couple of weeks? Particularly against the backdrop of higher fuel prices just relative to what you saw through the first 6 weeks of the second half.

Thanks Kieran. I'll get Steph to pick that one up.

Hi Kieran. Thanks for your question.

You saw in the announcement that sales for the first 6 weeks were down 0.2 of a percent. There's nothing in the last 2 weeks that is substantially different in that trend between the rest of that period.

I think you can kind of say that it's a pretty flat performance over the full 6 weeks.

Okay. Thank you.

Appreciate there's still a fair amount of uncertainty around the duration of the conflict, but can you just help us understand what exposure you have when it comes to increased freight costs? I guess to the extent that those pressures continue, are you looking to offset them through price increases, or are we likely to see some margin impact in the near term?

I can pick that one up again. Look, I think there's no question that it is an incredibly uncertain time.

The short answer is it's really just too early to say. We think that there's three potential areas where we will likely see impacts.

Clearly international freight and shipping costs are going to come under pressure. We know that there'll be some increases there.

Then obviously you've got domestic transport costs. There'll be some pressure there too.

Then I guess the last area where we would expect to see impact will be around demand. It's a very difficult one to predict at this stage.

Clearly customers will be feeling the impact around increased cost of living. That said, businesses like The Warehouse, we're incredibly well placed to meet the demands of customers and the needs of customers in a tighter environment.

Value brand such as ours typically have done better in environments like this. While there is definitely some headwinds, there's the potential for some offsets as well.

We're keeping a really close brief. We're doing a lot of scenario planning as to how that may impact us.

In terms of being able to give you specifics, it's really just too early to say at this stage.

Is it fair to say that you're not putting up your prices in the near term on that basis?

Once again, it's just too early to say. We've got a really strong watching brief, but it's too early to call that at this point.

Okay. Maybe just a question on Noel Leeming.

We've seen that the sales run rate continued to decline there, and I guess I compare that to the likes of JB Hi-Fi, who's been printing some fairly good numbers. Like-for-like sales up 20% in the latest quarter and Noel Leeming's turned negative.

Can you just help us understand why there's such a large difference there? I appreciate the brands aren't entirely like-for-like, but do you think you're losing market share in Noel Leeming, and if so, why?

Thanks Kieran. I'll ask Mark to pick that one up.

Hi Kieran. Yes.

I think JB Hi-Fi is a great competitor to us. I think we played a margin game versus a sales game, and they have a 17% gross margin profile in New Zealand versus ours.

We chose to play a slightly different game. You would have seen the bottom line performance obviously reflects that.

There are certain categories that we decided to pull back on, which are low margin categories as a result, and I think some of that did give up some market share in the short term, but we felt that that was something that we were willing to do. We still are a formidable competitor, and our presence in the market is very very strong.

Like you say, we obviously have a whiteware component and various other components that they don't have. As those sort of units start to come back, we're starting to see real benefits in that business.

The key thing in it, Kieran, is that also we mentioned some of the Flybuys and your base is your base, we don't want to make excuses. It was a big big component for us.

We were one of the largest Flybuys components and that really did help us last year. We also got commercial sales, which we had some really big commercial sales in the base last year's, which impacted some of our growth.

Thank you. Then maybe I'll just squeeze one last question in around your OpEx.

Good to see some cost out in the first half, but can you give us a steer on what you're expecting in the second half there, just in terms of year-on-year run rates?

Thanks Kieran. I'll come back to Steph for that.

Yeah. Thanks Kieran.

You obviously saw that our cost of doing business dropped below that 31% target, which we have been aspiring to. Clearly that's helped by the fact that we have the peak period trading in the first half.

It's great progress. You've seen things like support office costs down 8% last half, this down another 8% again this half.

Also we are acknowledging that in the second half that run rate will normalize a little bit off the fact that sales will be lower in the second half than they are in the first.

On a like-for-like basis with the second half of FY25?

We'd still expect them to be lower. We'd expect them to be lower than the second half of 25, but just not at the same rate as the first half of 26.

Does

that make sense? Okay.

That's helpful. Thank you.

Yeah.

Cheers.

Yeah. Good morning, team.

If I just ask maybe a couple of questions around your different business codes, both in red, which are helpful. The aged inventory clearance, that looks like a reasonable drop in aged inventory.

Can you just give us a bit of a steer, I guess, one, how that clearance went and the impact of it, and then I guess ambitions on the space or to take it lower?

Thanks Guy. The call unfortunately is a little distorted, but I think we've got the gist of it.

I'll get Mark to pick that up, but he may need to clarify with you that he's got the gist of your question.

Thanks Guy. If I just replay back to you, basically, we obviously came out with higher aged inventory at the end of last year, impacted H1 results, particularly the first quarter.

Looks like the aged inventory has come down. Is there more work to do?

Would that be a good summary?

Yeah. Just maybe a bit of the impact itself.

Was that contained to the first quarter?

It was primarily in the first quarter in the Red. Obviously Blue had less of a impact.

They dealt with, but theirs was still also a much bigger than what we would hope. Despite their very strong overall performance, their first quarter second quarter performance was quite dramatically different in Blue and in Nolls, with both businesses jumping gross margins quite considerably.

In the Red, we struggled in Q1 in particular because of that aged inventory, particularly in apparel with winter merchandise and some home winter merchandise. Obviously whenever you've got aged inventory or stuff that you carrying, it does put pressure on your supply chain, cuz you've got only so many slots in a DC and all of those type of knock-on effects.

We obviously have to get through that, and one, to release working capital, and two, to obviously release this pressure within our supply chain. There is still more work to do, like Steph picked up, but we're trying to do it responsibly.

There is good stock in there, but it's not stock that's always the wanted stock that the customers want, but there's enough. We have to just systematically get through it.

There will be some sort of flow-on effect into probably H2, but we don't know the extent of it. We'll obviously doing it responsibly.

Just building on Mark's comments there, I think there's a bit of a ratchet there. Some of the earlier stuff was still dealing with legacy stock,

and

which was much worse than the sort of general cycle of age. As we move forward and the product mix entering the business is better and more planned, then obviously the age profile and the need to deal with that is improving.

That's probably what we're seeing in the underlying numbers

is

we've still got aged product to deal with, but it's getting off a better and better base.

Yeah. Yeah.

The fresh products, like John said, as that sort of seesaw comes in with the fresh products got a much stronger appeal, then your margins will boost straight through because it'll dilute your markdowns.

Okay. Again, the Home and Apparel gross margin chart helpful to see that that's lifting.

Can you just give us a bit of colour about how you're thinking the sales versus margin balance in that, because that's obviously come with a little bit of a trade-off in terms of lower unit sales?

You have slightly lower unit sales mainly because obviously the predominant markdowns were actually in apparel. That's why we had a bit of a softer apparel result, cuz obviously if you're not selling at full price, you do take a slight deflation on like-on-like period.

What I am seeing in the second quarter and actually just going into every month, the apparel business gets stronger and stronger. In January, it had some of its strongest gross margin I've seen in the business in the history that I've looked at so far.

We are getting stronger in that business, and I think as we've got a new leadership in place, which is making some great changes. We've put our Chief of Planning in place, which is making great strides to reduce our inventory whilst still maintaining gross margin.

I think that's the key message in Red is that we've been able to sort of hold gross margin in some key categories with also containing inventory. Often what happens is you can gain gross margin, but lose the battle on inventory, and the planning getting the balance right, we'd be able to pull down inventory, release working capital, be able to deploy it back into fresh product we know that's going to win in the future seasons, but whilst still trying to be responsible with margin.

I think that's the balance we having to strike.

Thanks for the colour there. Then just maybe one last one for me.

The average daily bank borrowings down $52 mil. Taking this pretty helpful colour, can you give us a sense of what your sort of core debt is, or what that average daily bank borrowing is?

Thanks Guy. I'll get Steph to pick that one up.

Hi Guy. Oh,

sorry, Guy. Yeah.

Our borrowings, you will have seen we've got $300 million worth of facilities. At the half, they were at $90 million.

The average range is probably somewhere between that $50 [million?] and $100 [million?]

or something like that kind of mark would be a pretty good gauge for you to think of as an average. It's quite a material reduction.

That's the key point. Off the back of better inventory management, managing our capital investment more tightly, yeah, we've seen material improvements there, something we're really pleased with.

Great. Thanks.

I'll pause there.

Hey, good morning, guys, and congrats on the result. Maybe just a quick first question on Red.

You guys sort of talked about some of the work you're doing on margin there. Maybe just the way you see this business going forward in terms of category mix.

FMCG was something you talked about a lot and now that's turning into more of a health and beauty plus some other FMCG categories to get the margins up. Home and Apparel you're doing a good job on margins there, but maybe just where you guys see this business going in terms of category mix.

Thanks Paul. Mark, I think you can pick that one.

Paul, I think we're going to, like we've discussed with you guys before, I think we're going to go with a market presentation, which will obviously make all of this hopefully a lot clearer from a straight go forward strategy. Like you say, Home and Apparel are pillar categories for us in terms of the overall contribution to the business, we have to get those right.

Health and Beauty, when we've done the analysis on our FMCG, which is what we call grocery, which is your traditional food, and then there's non-food, which is broken up into pet, cleaning, baby, and Health and Beauty and wellness. That Health, Beauty and Wellness and pet, for instance, for us and baby has really done super well.

It's an area where we really believe that we can create a real meaningful business, which, when you're growing a business, you're testing and learning, and we've trying to garnish the learnings there. Then on the food side, we've really had a good uptake on our food offering, but we've probably gone a bit wide on SKUs, we just trying to rationalize the SKUs and making sure that we curating that offer that it's really the offer that customers want and would want to shop us for.

That's really where we're getting to, and that's helping us sort of also manage the margin mix. That's in that larger FMCG bucket.

Cool. Then I think it was kind of encouraging to see you guys announce the two store openings in Mangawhai.

Maybe if you guys just want to talk to what you looked at in terms of that catchment and what numbers you had to see to feel confident enough to press go. I guess you can add on the store in Wellington as well for Blue.

I think you go through a feasibility process. Some of it is just intuitive.

You can just look at the level of development. If you popped a pin on Google Map, you're going to see how much land has been excavated there.

You'll see that Bunnings and New World are there already. The reports are that they both doing extremely well.

The New World are looking for more and more space. With all the golf courses up there, there's a big catchment of people that are coming into the area.

There's just generally an urban semi-migration up north that we felt that that area was a huge growth catchment. What we do do is we use credit card data to help us determine the level of spend in and around the area on discretionary, because card spend is a great indicator of what people are spending on and will spend on in the future.

The data came back very very strong, and then obviously you look at where your closest proximity stores would be, and how much cannibalization is there relative to where you think where your closest store is. When we did all of that, we looked at the overall returns and we think it's a really good site.

Not only, obviously it's still in development and so a lot of it will grow into, but that's The Warehouse's DNA. We were in early communities throughout our history and that doesn't change.

Just building on that from Mark, is basically that is a key point. We've actually got strong understandings of how to support smaller communities and to move into a growing catchments and service them early with those needs.

That data obviously informs when we see the next opportunity coming up with the next need base coming up. Maybe the Wellington

Oh, the Wellington, yeah. The Tory Street you're referring to the stationery store, Paul?

Yes. Yeah.

It's for the same reasons. Tory Street and Wellington, Wellington CBD area is fantastic.

We're actually looking for a new Red store. I think last year you would have noted that we had to vacate that Tory Street site.

We didn't want to vacate. It was just we couldn't come to agreement with the landlord.

We're actively hunting to get into a site in Wellington, cuz it's a key area for us. The Wellington store in CBD is just part of the general expansion of the Blue business.

I think Warehouse Stationery business I believe we've spoken about before through that previous strategy, the brand of Blue unfortunately probably got lost in the mix. I'm particularly excited on it.

That brand has got incredible gross margins, great contribution to the bottom line. I think we've got a real right to play there, and we've got great strength.

I actually think you're going to hopefully see a lot more from that brand, and Tory Street's just one example of that, and it's performing well and to feasibility.

Cool. Then maybe just last one from me, on cost, you guys have done a good job through the first half, and that's going to run rate better into '27 as you say.

You guys are working pretty hard on margin, and so I guess, big picture, do you think your target of 33% oh 34% gross margin, 31 cost doing business, 3% op margin, do you think that's, one, achievable in the near to medium term, and then do you think you're being ambitious enough there as well?

I believe in the businesses. I think the underlying leverage of the business should suggest that that's true.

That's why we're spending so much time on the retail and sort of drawing out these retail fundamentals because there's so much value trapped there, Paul. For me, not even growing the top line, the value is trapped in the operating model.

That's my observation. Obviously our cost of doing business, it has to evolve, and we're doing some strides on that, and you would have seen some of those changes we trying to do and making sure we execute in the areas that we feel like the lowest cost to serve and trying to be really special in the places that make you different and where your strengths need to be.

That's where we trying to invest in those areas. In my personal view, each brand has a real value trap that can be unlocked, and so that the glide path to that 33 or 34, 31 and then 3 on the bottom is definitely still in scope for me and the management team and the board.

You have this Middle East conflict. It does definitely think, well, wow.

Okay. We've got a whole bunch of potential costs coming my way.

How do I have to navigate that? It's your best guess, but if based on the potential of the business, it should easily get there in time.

That's my view.

Awesome. Thanks, guys.

I'll leave it there.

Thanks, everyone, for your time today, and I'd just like to thank Mark and the relatively new leadership team for the dedication they've shown to the business and the progress they're making and steadily moving us forward, improving both our brands and our financial performance. Thanks, everyone, and thank you for your time.