New Zealand’s The Warehouse Group says it will phase out its Warehouse Extra concept.
The move will cost the retailer up to $NZ12 million in exit and restructuring costs, including asset write-downs of $NZ5 million and the reconfiguration of current Extra stores.
The company expected an annualised pre-tax improvement in operating earnings of about $NZ9 million.
The company said the decision followed a “comprehensive review and assessment of future earnings potential”.
Chairman Keith Smith said the “company’s aspiration to achieve the critical 10% halo benefit in general merchandise and apparel” would not be realised.
“As a consequence of this, the Extra strategy will not meet our return on investment criteria.”
He said the company planned to “simplify” the business and focus on its core business.
Fresh produce, meat and frozen foods will be withdrawn from the three existing Extra stores within the next six months.
The pharmacy and health and beauty category areas are to remain.
“A decision has yet to be made in respect of liquor currently ranged in six of the company’s 85 stores.”
MD Ian Morrice said the Extra stores had been an “important trial” for the retail chain.
“The format and level of investment has been managed to ensure the supercentre model was properly and thoroughly tested with the benefits flowing to the wider business. These benefits have been significant particularly in relation to range extensions, store operations, supply chain and systems.