Stock of the Day: The Warehouse Group Ltd

The Warehouse Group Ltd [WHS.NZX] share price has been hammered over the last 6 weeks. From a high of nearly $4.05 back in late November closing down today on low volume at $3.52.

The stock has been a victim of constant media attention on Christmas shopping figures and official retail sales releases over the last few weeks. Pumpkin Patch Group Ltd [PPL.NZX], Hallenstein Glasson Holdings Ltd [HLG.NZX] and other retailers have been similarly affected.

To be sure the WHS Christmas shopping fortunes for the first half of the 2011 financial year are very important to the bottomline but there is only anecdotal news at the moment that they are being hit hard.

For the share price to be hit by around 12% in six weeks seems a little overdone and I will be watching for further weakness for an opportunity to buy more shares for as little as possible.


Disclosure: I own WHS shares in the Share Investor Portfolio

The Warehouse Group @ Share Investor

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Discuss WHS @ Share Investor Forum - Register free
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c Share Investor 2010

The Warehouse still interested in Australian Expansion

In a Share Investor Q & A out 20 Sept 2010, on Ian Morrice, CEO of The Warehouse Group Ltd [WHS.NZX], Ian gives some very interesting answers to my questions to him. We cover aspects of his business life, retailing in general and the Warehouse Group specifically and some other topics thus far not broached by other interviewers.

One answer that really interested me was the answer to the following question on the Australian retail market and any possible move back there:

"SI - Ryman Healthcare Ltd [RYM.NZX] has recently announced a move into the Australian market while Telecom NZ [TEL.NZX] is selling up their Australian assets. Do you you see the possibility of The Warehouse going back to that market given the right opportunity and a more appropriate execution of an expansion there?

IM - We would consider it but not through taking the Red Sheds model to Australia.

SI - What mistakes were made when the company entered the Australian market in 2000 and how would you do things differently if you entered that market?

IM - Any future move into Australia would fully consider the competitive environment and the availability of the appropriate footprint in the right locations".

Ian's predecessor, Greg Muir, gained a foothold into Australia in August 2000, by acquiring the Clint's Crazy Bargains/Silly Solly's chain of 115 discount variety stores and ended up losing the thick end of $200 million of shareholders money when Ian bailed out in 2005.

Not Ian's fault of course and it looks like any further entry into Australia would be a bit more considered and planned rather than the rush of blood to the head that Greg Muir - former director at Hanover Group and current director at Pumpkin Patch Ltd [PPL.NZX] - had when he decided to plunk down north of $100 million to buy the aforementioned chain.

I was very excited about the move into OZ back in 2000 but upon reflection and 10 years more experience in the stockmarket I now realise I had my head firmly in a place that never sees the sun in terms of the planning of the Australian expansion. I still believe that a more considered and planned approach to expansion of the company in Australia would be a wise move on Ian's part.


Disclosure: I own WHS shares in the Share Investor Portfolio

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The Warehouse sale could hinge on "Extra" decision
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The fight for control begins soon

Discuss WHS @ Share Investor Forum - Register free
Download WHS company reports

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c Share Investor 2010

Warehouse Group: Shares set to follow company fortunes

This ugly looking Warehouse Group Ltd [WHS.NZX] chart over the last year doesn't make for good reading and I don't think things are going to get much better for the company over the coming year. The whole retail sector is patchy and retailers like the Warehouse, who traditionally have done well during recessions are, well, not doing so well.

The share price is going to reflect this and as markets are forward looking they clearly don't see much recovery for the "red sheds " anytime soon either.

If 2008-2010 were tough years, 2011 doesn't look much better for this company either.

Few have discretionary funds and most are using those to retire corrosive debt levels.

The share is good buying now with a decent dividend level but investors wanting shares in the company may want to see a January 2011 sales release from the company to see how well the all important Christmas trading goes for the company.

I am guessing decorations might go up in one of their stores earlier than normal this year to make the most of the silly season.

Disc I own WHS shares in the Share Investor Portfolio


I am going to end the reader questions to the WHS CEO Ian Morrice in a couple of days. If you want to ask him a question for a "Share Investor Q & A" please do so here.


The Warehouse Group @ Share Investor

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The Warehouse Group: 2010 Interim Profit Review
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Long Term Play: The Warehouse Group
Share Investor Short: Warehouse Group yield worth a second look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
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Long vs Short: The Warehouse Group
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The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
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Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
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The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Discuss WHS @ Share Investor Forum - Register free
Download WHS company reports

Shop online at The Warehouse


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c Share Investor 2010

Mixed Retail Outlook

Recent announcements by retailers Briscoe Group Ltd [BGR.NZX] Kathmandu Holding Ltd [KMD.NZX] and Hallenstein Glasson Holdings Ltd [HLG.NZX] has got me thinking about the fortunes or otherwise of the other retailers in the Share Investor Portfolio.

Briscoes had a mild upswing in sales for the last half year to 1 August 2010 but in the last quarter of that half sales were down on the same period in 2009. This clearly indicates that the economy is not well at all. Kathmandu over-promised in their IPO Prospectus and last week delivered under par sales revenue. They cited a poor overall retail environment for the gap between their promises and last weeks reality.

Hallenstein Glasson had a different story to tell however with a sizable lift in projected profit for 2010 when compared to the same period in 2009 and a reasonable lift in sales considering the current poor retail environment. This is of course off a reasonably poor 2009 profit but the company is showing promise in a time of closed consumer wallets by concentrating on all important margins, avoiding frequent sales and keeping down costs. All the things the aforementioned seem to be ignoring - with the exception of BGR on costs.

The Warehouse Group Ltd [WHS.NZX] I suspect is going to have disappointing results coming up in September and Postie Plus Group [PPG.NZX] is likely to similarly disappoint the market - nothing new there then.

With the exception of expenses incurred from thus far failed attempts by Michael Hill International [MHI.NZX] and Pumpkin Patch Ltd [PPL.NZX] to expand in North America I think those two companies will see some improvement.

Retail successes over the last year seem to be concentrated on the specialist retailers who have a loyal following of their strong brands rather than the larger broad based "department store" type operators. They seem to have been able to cuts costs in the lean times in a more expeditious manner than their bigger competitors and keeping costs down, while attracting higher margin custom in this recession is key to staying in business.

You simply cant make money by selling stuff too cheaply just to get rid off it.


Disc I own BGR, HLG, MHI, PPL, PPG & WHS shares in the Share Investor Portfolio


Briscoe Group @ Share Investor

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Hallenstein Glasson @ Share Investor

Long Term View: Hallenstein Glasson Holdings Ltd
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Kathmandu @ Share Investor

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Discuss Kathmandu @ Share Investor Forum
Download KMD Company Reports


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Postie Plus Group @ Share Investor

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Pumpkin Patch @ Share Investor

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Discuss PPL @ Share Investor Forum
Download PPL Company Reports


The Warehouse Group @ Share Investor

Share Investor Q & A: Questions to The Warehouse' CEO Ian Morrice
Long Term View: The Warehouse Group Ltd
Share Investor Short: Warehouse Group yield worth a look
The Warehouse Group: 2010 Interim Profit Review
The Warehouse: Big Brands, Big Opportunities
Warehouse strike opportunity to buy
Long Term Play: The Warehouse Group
Share Investor Short: Warehouse Group yield worth a second look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Discuss WHS @ Share Investor Forum - Register free
Download WHS company reports





c Share Investor 2010

Hallenstein Guidance not indicative of wider retail recovery

News that Hallenstein Glasson [HLG.NZ] has had a good half year to 24 Jan 2010 in a profit guidance to the stockmarket, shows how good management at that company have been to weather the economic downturn but that must be put in the context of a particularity bad half for the corresponding 2008 period and of course this is only a six month period - lets not count our board shorts until they are sold sort of thing. With current sales and profitability it is very likely that the company will beat 2009 full year profit of nearly NZ$13 million and that was the worst year since the 2003 full year result.

The most important part of the update is that margins for the company have improved, not easy to achieve during the seemingly endless summer sales of its competitors, and that stock levels have been managed to levels that seem to have avoided the big prices cuts of competitors who have stock to burn. Management have seen fit to boost the dividend by 40% to 14c, so they seem confident that the good news is set to continue.

A good definite cold Winter season will bode well for the coming 6 months of operation and it is this traditional slower sales season that will define a good or excellent outcome come full year reporting in August.

Retail over the last 2 years has been hard going in New Zealand and is not likely to recover to pre-recession spending for many years to come in my opinion.

Over the last 6 months many retailers have fallen by the wayside, Stax, Hill & Stewart have been but a few and some independent retailers have gone to the wall as well and we are likely to see more over 2010, so the Hallenstein profit update is by no means an indicator of a wider retail recovery.



Meanwhile the stockmarket has overreacted in a big way to this positive news (see chart above), marking up the stock price by 35c on close of trading last Friday and 15c at time of writing this post. This is more than a 10% gain in 2 days and not a wise purchase at these prices considering the uncertain overall retail outlook, even though the dividend makes the annual return at the current share price of close to 10% net.

Long term investors in this company would well be advised to wait for another opportunity, while shorts termers could see some upside in dividend stripping as we come closer to the dividend payout date.

Proceed with caution.


Disclosure: I own HLG shares in the Share Investor Portfolio


Hallenstein Glasson @ Share Investor

Stock of the Week: Hallenstein Glasson
Hallenstein Glasson Australian expansion needs expert execution
Why did you buy that stock? [Hallenstein Glasson]


Discuss this Stock @ Share Investor Forum - Register free

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c Share Investor 2010

Stock of the Week: Hallenstein Glasson

The resilient result out late last week for Hallenstein Glasson [HLG.NZ] prompted me to add this company to the Stock of the Week list. A profit down from last year nonetheless but a result that shows promise for better to come and a well managed business in very troubled times.

Like every other stock on the New Zealand sharemarket this one has taken off recently (see one year chart above) and at NZ $3.03 it is higher than it was over a year ago when the economy really hit the fan and people stopped shopping but it has been alot pricier at a high of over $ 5.75 3 years ago (see 5 year chart below)

Another attractive selling point is its consistently good dividends that have been paid over the long term and this has been the result of maintaining costs to a minimum and growing sales and therefore cash flow to pay that dividend.

It is paying a gross return of over 10% at today's share price of $3.03.

If you are interested in a good long-term investment get in on general market weakness come October.

Good Luck!

Hallenstein Glasson @ Share Investor

Hallenstein Glasson Australian expansion needs expert execution
Why did you buy that stock? [Hallenstein Glasson]


Disclosure: I own HLG shares in the Share Investor Portfolio

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