In a statement to the NZX, the group reported the Christmas trading period had demonstrated an improving trend, despite the radical shift to go-to-market strategy in the Red Sheds.
Same-store sales were down 2.8% over the "critical" Christmas trading period compared to the first-quarter rate of 4%.
Year-on-year unit sales showed an increase of 5.1% and transactions rose 2.9% in conjunction with strong sale of seasonal lines.
Mr Grayston said while the group was keen to start delivering the benefits of its transformation, there was a long way to go. But latest trading showed encouraging signs.
"First-half trading to date has confirmed for us our customers like and have responded well to our pricing and product changes. We continue to invest in technology and building out the team to execute the next steps in our change programmes."
As expected, the move to hi-lo to every day low price (EDLP) in The Warehouse Red Sheds, coupled with a one-time reduction in ranges and products and consequent clearance activity, had resulted in a reduced average selling price. Margin rates on current products had generally improved and customers’ reaction to the pricing changes and product improvements had been positive.
Further work was in progress around price elasticity with a view to improving gross margins. The one-off clearance of discontinued products was on track.
Warehouse Stationery was preparing for its peak back-to-school trading season. Sales were expected to be down about 6.5% at the first half, based on softer performance of communications and technology segments and the one-off impact of the integration of the stationery business into core red sheds operating systems at the start of the financial year.
Noel Leeming continued to perform strongly. Torpedo7 retail had been steadily improving during the year.
Mr Grayston said the forecast adjusted net profit from continuing operations was $32 million to $35 million, 22% to 28% down on the comparative continuing operations performance last year.
The result for the half included a significant accrual for a redesigned incentive programme, intended to reward better than expected financial performance along with reinforcing specific staff behaviours necessary to execute the business transformation.
"It recognised the need to retain staff and recruit top global talent through this rapid period of radical transition."
If the second half year performance failed to deliver on the group’s improved outlook, the accrual would be reversed to profit. If not for the accrual, the first-half financial performance would be close to last year’s, he said. Board chairwoman Joan Withers said many of the operational impacts on profit performance were transitional in nature and not expected to recur.
The group was in the process of a fundamental transformation to improve performance and profitability, the key focus for 2018.Full-year guidance would be released on March 8 with the first-half financial results, she said.
