Thursday, July 31, 2008

Warehouse decision a loser for all

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In the absence of a detailed summary of the decision out today by the Court of Appeal to stymie a bid for The Warehouse by Foodstuffs or Woolworths Australia, I have to say I am surprised by the decision.

This from Paula Rebstock, Commerce Commission chairman

"New Zealand consumers know that more competition is needed in the supermarket sector. In coming to its decision to decline the acquisition the Commission considered that The Warehouse had already brought important new dimensions to supermarket competition, and potential competition, through its innovative supercentre stores."

What "new dimensions" have the Warehouse brought to Supermarket competition?

Answer? None.

It has 3 "Extra" format stores whose performance thus far has been underwhelming and its potential for the future is in doubt.

The Commerce Commission and Paula Rebstock have made a name for themselves over this appeal and it seems that was all this exercise has been about. Commercial realities have been left in the dust.

Either the legal team for the defence has lost an easily winnable case and or the Court of Appeal Judge is a knuckle dragging, dribble mouthed fool for making such an inconceivably out of touch decision.

Was the Judge off his medication that day?

That is the only conclusion that a sane individual can come to.

The Commerce Commission's legal team had only one string to their bow, the Warehouse Extra stores and their possible beneficial impact on grocery prices but they have no material influence in the supermarket sector and are unlikely to in the future. They have less than .05% of the grocery market.

Rebstock and her Commission have dragged this possible sale saga out for far too long, it has cost the three companies involved, the Kiwi taxpayer, The Warehouse,Foodstuffs and Woolworths shareholders and ultimately the New Zealand consumer.

Economies of scale can be brought to bear if one of the parties bought The Warehouse and that ultimately means cheaper grocery prices.

Unless a likely appeal to the Supreme Court is successful, New Zealand consumers will be the biggest losers.

Warehouse shares were down .60c to NZ$3.22 per share on 4.6 million shares today on the news.


Disclosure I own WHS shares


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