Nick Grayston (The Warehouse Group)
The Warehouse Group made record sales and good progress on its ERP rollout in 2023 only to see its after tax profit plunge 56.2 per cent.
There are also signs the cost of the ERP rollout is more than the $100 million ballpark figure originally mooted.
Group sales of $3.4 billion in the year to 30 July were up 3.2 per cent on 2022, including record sales result for The Warehouse of $1.9 billion, up 9.6 per cent.
Technology chain Noel Leeming reported a 3.3 per cent decline in sales, totalling $1.1 billion with online sales decreasing by 33.7 per cent to pre COVID-19 levels contributing 11.1 per cent to the chain's total sales.
Noel Leeming gross profit margin decreased to 22 per cent due to cost pressure and increased promotions, while operating profit was $27.3 million, down 49.3 per cent.
Group CEO Nick Grayston said he was pleased with the resilience of The Warehouse and Warehouse Stationery.
"It’s been a tough year for both us and our customers," he said. "We're proud to have kept the essentials affordable for families and strong sales at The Warehouse reflect this.
"We continue to invest in the transformation of the group, particularly in infrastructure. This has coincided with much weaker consumer confidence and a shift in spending, especially big-ticket items, to travel and entertainment.
"These factors have compromised our margin and profitability and particularly affected Noel Leeming and Torpedo7."
The group's new Oracle enterprise resource planning finance inventory (ERPFI) system was "progressing well", the group's annual report said.
"This will provide more timely reporting, project accounting, real-time inventory management and enable improved stock availability. Continued purposeful investment in infrastructure that will reduce our cost to serve long term and enhance our customer experience remains a priority for the group."
The migration of Torpedo7 onto the new platform began during the year.
Testing of the ERPFI was expected to continue through 2023 with the go-live in the second half of 2024.
The first phase of The Warehouse's group order management solution (GOMS) went live in October 2022.
"Through our brands’ e-commerce webstore and mobile apps, future GOMS releases will deliver a single fulfilment optimisation solution integrated with real-time inventory for all our brands," the report said.
"This will improve our customer experience for online orders, for delivery and click and collect."
A master data management system was deployed across all brands and products and integrated into the ERPFI's Inventory, warehouse and e-commerce platforms.
"Our last iteration will see us integrate dimension and supplier data through a self-service portal, expected to be completed in FY24.
"Our human capital management system had a first release in October 2022 which included deployment for around 2,400 employees, with the full system going live in August 2023."
This has now been rolled out to all 11,000 employees including stores and distribution centres.
While Oracle is the core ERP system, Microsoft Dynamics 365 is being deployed at Torpedo7.
Much of the investment undertaken in FY23 related to software as a service (SaaS) projects that are a blend of capitalised and expensed spend.
Initial costings of the ERP rollout were in the region of $100 million. However, the report said total project expenditure was $154.4 million.
This comprised capitalised project spend of $113.2 million in FY23 (FY22: $107.5 million) and prepayments of $11.4 million in relation to SaaS projects in FY23 (FY22: $8.2 million).
In addition to the capitalised portion, expensed project spend relating to SaaS projects amounted to $21.9 million and non-SaaS-related expensed project spend amounted to $7.9 million.
