The Warehouse Group plans to cut head office jobs as increased sales fail to deliver profit growth.
Group chief executive Mark Stirton said the company was focused on cost reductions, including a proposal to restructure head office roles without reducing front line staff numbers
"These changes are unfortunately essential to ensure our operating model is fit for purpose and to secure the future of The Warehouse Group as New Zealand's leading value retailer," he said.
"Trading conditions remain challenging, and we are doubling down on our efforts to improve gross profit margins and reduce cost of doing business (CODB) in order to help improve profitability."
The Group's first quarter gross margins ended October were down 40 basis points, despite sales rising 0.9% to $674.1 million on the year earlier, with like-for-like sales up just 0.1%.
The Red Shed sales rose 0.7% in the quarter, with Stationery up 2.6% and Noel Leeming up 1.6%.
Online sales increased 8.2% on the prior period, making up 7% of total first-quarter sales, compared with 6.5% the year earlier.
Still, the retail group's gross profit margin was down 40 basis points in the year to date, compared with the same period last year.
Stirton said average selling prices fell 2.4% due to the highly promotional retail environment, changing sales mix as grocery continued to grow, and ongoing clearance activity.
"Our shareholders rightly expect decisive action, and that is exactly what we must deliver," Stirton said.
"Our strategy is twofold: reducing costs now to recover profitability, while continuing to invest in the areas that will strengthen The Warehouse Group for the long-term, like our stores, prices and product range."
He said the goal was to drive down the cost of doing business down to less than 31% of sales.
"There are encouraging signs our new product ranges and in-store experience are resonating with customers," Stirton said.
The cost reset programme was expected to lower The Warehouse Group's cost base, help restore profitability, and strengthen capability to support the Group's long-term sustainable growth.
"These are difficult decisions, and we do not take proposed changes that impact our people lightly.
"We know the effect this has on our team and their families, especially in the current economy, and we are committed to supporting our people through the upcoming consultation and change processes with care and respect over the coming months."
