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A change to accounting standards for cloud-based software have hit The Warehouse Group’s profit and loss account at perhaps the worst possible time.
The group today reported a net loss after tax of $54.2 million, significantly due to the disposal of its struggling Torpedo7 outdoor chain in March.
The loss compares with a net profit after tax of $29.8 million in 2023, a deterioration of $84 million.
Due to the group’s investment into new systems and platforms, technology running costs increased 18 per cent year-on-year.
However, a change in international accounting standards affecting cloud-based software also forced the group to expense $18.6 million in information system investment it would otherwise have capitalised.
In 2020, the group signaled about $100 million would be spent over the following two-and-a-half years to see the company’s fragmented technology landscape standardised onto Oracle’s cloud software at the back end with Salesforce’s commerce cloud at the front.
“It’s probably the biggest technology transformation we’ve undertaken, certainly since the last enterprise resource planning investment, which is by now probably 12 or 13 years old,” now former CIO Edwin Gear told NBR at the time.
The retailer told investors today it had reached a time of peak information systems development during the 2024 financial year.
“The group has invested significant capital to modernise our retail platforms, and while this has come at a cost to the group, it has set us up for the future,” the company told investors.
Group technology retail chain Noel Leeming reported sales impacted by reduced discretionary spending on high ticket items, combined with higher promotional and markdown activity as competitors chased market share.
The first half showed small declines in sales at the chain but this accelerated with an 8.6 per cent drop in the second half. Overall, sales declined 5.3 per cent year-on-year to a shade over $1 billion.
Despite decreased sales, gross profit margin held up well, driven by a favourable change in mix to higher margin product categories, the group reported.
Noel Leeming’s operating profit declined 36.6 per cent to $17.3 million.