Share Investor: The Warehouse Group

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Tuesday, November 29, 2011

The Warehouse Group CEO Mark Powell on new turnaround strategy

In a snippet of an interview with the new The Warehouse Group Ltd [WHS.NZX] Mark Powell about the new strategy for a turnaround in the company, which is due out latter this week, I asked Mark how long he thought his new strategy would take to have positive results on the bottomline and when shareholders would see the beginning of positive results:

Share Investor - When do expect to see the first evidence that your turnaround plans are working?

Marl Powell - In each of the strategic result areas outlined above results will vary in how soon they can be expected. Some changes such as in the marketing and store execution have already shown a great deal of improvement, other changes such as category developments and store refits have longer lead times, hence my references to improvement “over the long run”. Hence, as indicated in the strategy presentations given, we expect a decline in underlying NPAT in 2012 and aim to grow NPAT over the long run after that.

So full year 2013 is when shareholders can expect to see more profit and therefore money in their pockets. This is of course excluding any macro issues hitting the fan like the economic collapse of Europe or another shake at the head of capitalism the United States.

Keep your eyes peeled on Share Investor Blog for the full Q & A exclusive to this site only.

(read Q & A with previous WHS CEO Ian Morrice here)

Disc: I own WHS shares in the Share Investor Portfolio

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Ecoya's Geoff Ross
Xero's Rod Drury
Mainfreight MD Don Braid
Burger Fuel Director Josef Roberts
Sky City CEO, Nigel Morrison
Sky City Entertainment: CEO Nigel Morrison discusses 2010 HY
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Has the Warehouse lost its Mojo?
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The Warehouse Group Ltd: Takeover Prospect looking good on paper
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Share Investor Q & A: Warehouse Group CEO Ian Morrice

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The fight for control begins soon

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NEW - From Fishpond.co.nz | Think Bigger, By Michael Hill

c Share Investor 2011

Share Investor Q & A: Reader questions to Warehouse Group CEO Mark Powell (UPDATE)

The interview with Warehouse CEO Mark Powell is coming this week.

Apologies. Reader questions to Mark are now closed.

I have some questions, as I am sure The Warehouse Group Ltd [WHS.NZX] shareholders might also have, about the flagging last week by management at the 2011 full year profit result of a "turnaround strategy" for the company and its failing red sheds performance so I thought it was time for another CEO Q & A this time with new WHS CEO Mark Powell. (read Q & A with previous WHS CEO Ian Morrice here)

Lets get down to brass tacks and ask him what practically he is going to do to turn the company around. Here is your opportunity to ask him some questions about exactly what he is going to do.

To submit a question either email me here or leave your question at the bottom of this post.

Disc: I own WHS shares in the Share Investor Portfolio

Share Investor Q & A Series

Auckland Airport's Simon Moutter
Warehouse Group CEO Ian Morrice
Briscoe Group CEO Rod Duke
Ryman Healthcare's CFO Gordon Macleod
Ecoya's Geoff Ross
Xero's Rod Drury
Mainfreight MD Don Braid
Burger Fuel Director Josef Roberts
Sky City CEO, Nigel Morrison
Sky City Entertainment: CEO Nigel Morrison discusses 2010 HY
Convention Centre proposal interview with Sky City CEO Nigel Morrison

Wednesday, September 21, 2011

The Warehouse Group Ltd: Brands the answer to a turnaround

The 2011 full year profit result out last week for the Warehouse Group Ltd [WHS.NZX] has once again rekindled the obvious that the company needs to makeover its stores, bring in some service and sell stuff that people actually like to buy at the price that is consistently cheaper than its competition.

We have discussed just this over many years on this blog 1, 2, 3, and the essence of my argument for a warehouse turnaround has always been that the company must sell branded goods at the best prices with all the other retail essentials wrapped around that: consistency of product availability, better quality goods, better service with staff more engaged with customers and advertising that promotes these things to the right people.

Their 2011 strategy to investors for a turnaround doesn't fill me with much confidence that management know where they are at now let alone how they will get out of the rut they have been in for the last 5-6 years.

"TWL a mass-market retailer well represented in all customer segments other than extremes." Page 20 of 2011 report.

Have they been into one of their own stores and compared what others have to offer? The statement above would indicate they are wide of the mark on their own position in the market because I don't have to tell you dear reader (and long-suffering shareholder) that the Warehouse is now beaten in just about every category they compete in and the competition and punishment is only going to get worse.

That statement puzzles me because it simply isn't true.

They also indicate poor service, lack of quality and inconsistency of range availability being a problem. The consumer knows all that and these are of course just basics that retailers should know and execute at every available opportunity. A focus on this and the securing of big brands at the best prices, available everywhere else, will get more punters in the door and more importantly keep them coming back.

NB. if you are a WHS shareholder you can put your concerns and questions to the new CEO Mark Powell in a new Share Investor Q & A coming up soon.

Disc: I own WHS shares in the Share Investor Portfolio

The Warehouse Group @ Share Investor

Share Investor Q & A: Reader questions to Warehouse CEO Mark Powell
Share Price Alert: The Warehouse Group Ltd 2
Woolworths puts The Warehouse back on the shopping block
Share Investor's Total Returns: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Speculation Resurfaces
Share Price Alert: The Warehouse Group Ltd
The Warehouse Group: Tips for the new CEO
The Warehouse Group: Should Ian Morrice Go?
Has the Warehouse lost its Mojo?
Stock of the Day: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Prospect looking good on paper
VIDEO: Extended Ian Morrice Interview
Share Investor Q & A: Warehouse Group CEO Ian Morrice

Thursday, May 5, 2011

The Warehouse Group Ltd: Takeover Speculation Resurfaces

Update 27 June 2011, Woolworths keen on expanding WHS stake

I am going to speculate on some speculation in Businessday this morning that the appointment of Ted van Arkel as an independent director of The Warehouse Group Ltd [WHS.NZX] means the sale of the company is back on the table.

Van Arkel has a long history and ties to retail in both New Zealand and Australia and has a hard nosed reputation both as a former managing director of Progressive Enterprises, owned by Woolworths Ltd [WOW.ASX] and as an independent director of multiple boards and chairman of Restaurant Brands Ltd [RBD.NZX] and Charlie's Group Ltd [CHA.NZX]. He has also known Stephan Tindal and chairman Graham Evans for a long time, working with Tindal, through George Court, and Evans through Woolworths.

Van Arkel's links to Australasian retail maybe indeed be just a sideshow in terms of where the Warehouse is heading and he maybe there for his vast retail experience but I don't think fresh blood on the board like this is an accidental appointment apart from his resume.

Van Arkel's links to Woolworths are strong and as that company is a 10% shareholder of the company his connections here are significant. With Charlies, as chairman, he has recently presided over two big deals to get Charlies products onto Woolworth's shelves in Australia and in the stores of competitor Coles, owned by retail giant, Wesfarmers Ltd [WES.ASX]

With Restaurant Brands, under his time there, the company has transformed itself from a dog into a flourishing peacock in terms of performance and customer service. Van Arkel seems to be the goto guy if you want a director to lead to the way to better performance in retail.

He appears to be behind the brand change image of Postie Plus Group [PPG.NZX] which sadly, thus far, has failed to gain much traction or indeed profit.

His reputation as a retail "Mr Fix It" appears not to be a coincidence as The Warehouse is currently stagnating in terms of sales and profit and the introduction of such a director with such strong ties to retail in this part of the world is a significant move if Van Arkel's past has anything to go by.

While Van Arkel's appointment is not a clear sign that The Warehouse is back on the block, what is crystal clear is that his place with the company as an independent director means some significant change for the company in the months and years ahead.

His inclusion on the board does make a sale more likely because of his past track record but it is not a given.

Disclosure: I own WHS shares in the Share Investor Portfolio

The Warehouse Group @ Share Investor Woolworths puts The Warehouse back on the shopping block
Share Price Alert: The Warehouse Group Ltd
The Warehouse Group: Tips for the new CEO
The Warehouse Group: Should Ian Morrice Go?
Has the Warehouse lost its Mojo?
Stock of the Day: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Prospect looking good on paper
VIDEO: Extended Ian Morrice Interview
Share Investor Q & A: Warehouse Group CEO Ian Morrice

Wednesday, February 9, 2011

The Warehouse Group: Tips for the new CEO

With news out yesterday that Mark Powell is to replace Ian Morrice as CEO of The Warehouse Group Ltd [WHS.NZX]it is worth taking a closer look at Mark and what his experience might bring to a company that is currently experiencing falling sales, loss of market share and stagnant profits.

It is clear that he has a long history of experience in retail over a wide variety of geographical locations but his early years at The Warehouse have had patchy results.

Recent history though has seen him turn the company's stationery chain around and this kind of experience will be crucial in changing the direction and fortunes of the big red sheds.

Shareholders should make up their own minds as to whether Mr Powell is the right man for the job and we will find that out within a year or two based on some of his key decisions.

He needs to focus on service first before anything else, then concentrate on the poor morale of staff and the direction the company is going in.

A focus on just who the Warehouse customer now is, what they want to buy, at what price and a clear strategic direction of where the company is going and how it is going to get there.

Mr Morrice appeared to be planning things on the hoof as evidenced in the mish mash of directions, muddiness of the retail offerings and lack of a clear or sophisticated enough marketing plan.

The cartoon kiwi just doesn't cut it anymore. Ditch the quaint "kiwi owned" spiel and just give the consumer good branded goods at the best prices with excellent service.

Oh and Mr Powell, watch out for your boss Mr Tindall.

Mark Powell's Bio

Mark Powell is 49, married with two daughters and originally from South Wales in the United Kingdom. He migrated permanently to New Zealand when he joined The Warehouse Group in November 2002.

Mark’s original training and management experience was in the underground coal mining industry. He changed direction in 1986, joining Iceland plc, a UK food retailer with more than 600 stores. He has since held a number of management roles in the UK, Canada and Spain, including responsibility for Wal-Mart Canada’s logistics operations, supply chain and home shopping management for Iceland plc and the logistics operations of Tesco.

Mark has been involved with The Warehouse since 2002 in various full-time, part-time and advisory capacities, including as Interim CEO of the Australian operations, Group General Manager Supply Chain and Merchandise Planning, and most recently CEO of Warehouse Stationery.

In the past year the Warehouse Stationery team has achieved a significant turnaround, executed a continuing growth strategy and received the prestigious JRA Award as New Zealand’s best large company to work for, as judged by employees.

Mark has Bachelor degrees in Mining Engineering and Theology, and Masters degrees in Logistics (from Cranfield) and Business (an MBA with distinction, from Cardiff). He has also attended strategic leadership courses at Harvard and INSEAD.

BRIEF CURRICULUM VITAE

MARK DAVID POWELL

D.O.B. : December 1961
STATUS : Married with two daughters

An initial career in mining operations, then senior management positions in:
- Logistics Services (Tibbett & Britten Group, Booker Food Services and PwC Consulting)
- Retail (Iceland plc, Tesco, Wal-Mart Canada and The Warehouse Group)

CAREER DEVELOPMENT

Nov 2007 - Present The Warehouse Group
GM Supply Chain & Merchandise Planning and CEO Warehouse Stationery

May 2005 – Nov 2007 Advisor to The Warehouse Group / Independent Consultant

Nov 2002 – May 2005 The Warehouse Group : General Merchandise Retail Group
GM Supply Chain and Interim CEO The Warehouse Australia

Nov 2001 - Oct 2002 PricewaterhouseCoopers : Consulting
Director – UK supply chain practice

April 2000 – Oct 2001 Tesco Plc : Retail Stores
Board Director – Director – Logistics/Distribution

Sept 1997 – Mar 2000 Iceland Plc : Food Retail & Home Shopping
Supply Chain Director and Internet Home Shopping Director

March 1994 – Sept 97 Tibbett & Britten Group Plc : Logistics Services
Managing Director, T&B Iberia (based in Madrid - Spain) 1996-1997
President SCM Inc, Toronto Canada (Wal-Mart) 1994-1996

June 1992 – March 94 Booker Plc : Food Service Wholesale Supply
Divisional General Manager Booker Foodlink (Burger King, KFC, Pizza Hut, Wendy's, Whitbread)

March 1989 – June 92 Tibbett & Britten Group Plc : Logistics Services Outsourcing
DC Operations Manager, J.Sainsbury DC Shift Manager, Asda

Aug 1986 – March 89 Bejam/Iceland Plc : Food Retail
Retail store deputy manager
Various transport, warehouse and stock control supervisory positions in DC’s
Replenishment buying at Bejam Head Office

July 1980 – Aug 86 National Coal Board : Coal Mining Operations
Graduate programme
Various underground supervisory management positions

DEGREES

Carey Baptist College, Auckland 2005-2007 : Bachelor of Applied Theology

Cardiff Business School 1998-2001 (part-time) : MBA (Distinction), Thesis on the management of change in retail

Cranfield School of Management 1990 – 91 : MSc in Logistics (Distribution Technology and Management) – Winner of Coopers & Lybrand Course Prize

Polytechnic of Wales 1984 – 85 (part – time) : Mine Managers First Class Certificate of Competency

University of Wales 1980 – 83 : BSc (Hons) Mining Engineering class 2.1

Disclosure: I own WHS shares in the Share Investor Portfolio

The Warehouse Group @ Share Investor

The Warehouse Group: Should Ian Morrice Go?
Has the Warehouse lost its Mojo?
Stock of the Day: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Prospect looking good on paper
VIDEO: Extended Ian Morrice Interview
Share Investor Q & A: Warehouse Group CEO Ian Morrice

NEW - From Fishpond.co.nz | Think Bigger, By Michael Hill

c Share Investor 2011

Monday, January 17, 2011

The Warehouse Group: Should Ian Morrice Go?

Update - Hours after this piece was published it was announced that Ian is retiring this year and the company is looking for his replacement.

Speculation in mainstream business media over whether The Warehouse Group [WHS.NZX] boss Ian Morrice and some of his executives jobs are on the line because of sliding sales and sinking profits have got me thinking as to whether sacking of Morrice would be a rational decision based on his results as CEO of the company since he took over the reigns in 2004.

Lets have a look at the last 5 years of company performance then and make our decision based on his record of financial results.

Some key figures from a Research Report dated 16.1.11

Sales have dropped from almost 1.9 billion in 2006 to less that 1.7 billion in 2010. Net profit (before abnormals) from $69 million to $83 million. Return on assets, from 9.5 - 13%. Net margin from 3.14 to 4.93%.

To be fair Ian took over the company at a low ebb as the company was wallowing in debt due to a failed entry into Australia in 2001 and an exit from that market in 2005. This was a reason for the poor financial results around 2004-2005 when Ian took the reigns.

Therefore it makes subsequent years look good by comparison and this should be taken into account when assessing Ian's impact on the business.

There was also his failed move into the grocery sector with the Extra format that was trialled and cut a few years latter at a cost of at least 20 million dollars.

In the last few years the company has taken a big hit and Ian has placed the blame on various outside influences such as inclement weather, a change in customer demand or the recession.

It really doesn't look that good at all for his position when you look closely at the figures combined with his efforts to expand the business over his 6 year tenure.

He has basically failed to deliver what he was hired for - to turn around the business after the disastrous foray into Australia.

In an interview I had with him at the end of 2010 Ian seem to think he had done well over the last 6 years:

SI - What has been your main achievement or achievements at The Warehouse over the last six years as CEO ?

IM - In financial terms: NPAT growth + 40%, debt reduced from over $300m to under $100m whilst returning over $500m to shareholders. I am also pleased to have enhanced our strong brand reputation - 90% of the population still shop with us every year. I am proud of the many leaders who have developed their careers in the business over this time - our talent retention levels are over 90%. We have improved and modernised every aspect of the business over the past six years from source to shelf and transformed our supply chain internationally and domestically enabling significant cost reduction.

But we are yet to see an impact of Ian's input on the bottomline to date and we are unlikely to see that in 2011 either, in fact the status quo of dropping sales and profit will be de rigguer unless some changes are made and that should be made at the top in my opinion.

Disclosure: I own WHS shares in the Share Investor Portfolio

The Warehouse Group @ Share Investor

Has the Warehouse lost its Mojo?
Stock of the Day: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Prospect looking good on paper
VIDEO: Extended Ian Morrice Interview
Share Investor Q & A: Warehouse Group CEO Ian Morrice

NEW - From Fishpond.co.nz | Think Bigger, By Michael Hill

c Share Investor 2011

Monday, January 10, 2011

Has the Warehouse lost its Mojo?

Once upon a time, not so long ago, the Warehouse Group Ltd [WHS.NZX] was a "category killer" that managed to pounce on all of its competition in terms of its offerings and what price it put on those goods. It was usually the cheapest place in town and was the first and only destination for many a kiwi family who had some discretionary dollars to spend.

For investors and shoppers alike this is now clearly not the case.

The latest dip in sales for the group over the Christmas trading period was a mammoth 3.8% drop in same store sales across the Red Sheds and a flat result for their Stationery business.

This comes on top of flat sales for the Full Year 2010 Result & 2009 Full Year so the medium term pattern looks alarming to say the least.

What isn't at first clear is just why their sales figures are heading south. To be fair, competition like Briscoes Homeware, part of Briscoe Group Ltd [BGR.NZX] and Kmart are kicking their backside and they never used to. Offerings from The Warehouse' competitors are better and sometimes cheaper, indicating buyers for those competitors are doing a much better job at picking what consumers want.

Ian Morrice, Warehouse CEO has indicated that sales were down because of weak "consumer electronics, gaming, CDs and DVD" sales but this sort of excuse has been used by Mr Morrice before for sales dips and even in the centre of one of our worst ever economic periods the sheer size of the company should mean that its buying power trumps that of its smaller competition.

What I think might be happening though is that former Warehouse shoppers no longer know what the company stands for as it has transitioned over the last few years from a company with a focus of the cheapest possible prices for unbranded goods to a company that is now selling increased offerings of branded goods for close to what its competitors are.

Increasingly though, as traditional Warehouse shoppers get older and have less disposable income, the younger consumer is finding that there are hipper, cheaper places to go like specialty retailers like JB Hifi for electronics, DVDs and CDs and fashionable mall stores for lingerie and women's clothes. They simply wouldn't be seen dead at a a Warehouse store and that is clearly a problem for the company and its shareholders.

To be fair to the company other retailers are finding the going even tougher, with some vanishing over 2010 and more set to do so over 2011 as discounts get bigger just to keep market share. Some of its competitors are losing big money and will not be able to outlast the red sheds.

Having said that, The Warehouse have to decide whether they are going to offer more choice and brands at the best prices or languish like the competition they helped kill in the 1990s least they end up in the same boat themselves in years to come.

Disclosure: I own WHS shares in the Share Investor Portfolio

The Warehouse Group @ Share Investor

Stock of the Day: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Prospect looking good on paper
VIDEO: Extended Ian Morrice Interview
Share Investor Q & A: Warehouse Group CEO Ian Morrice

NEW - From Fishpond.co.nz | Think Bigger, By Michael Hill

c Share Investor 2011

Share Investor

Tuesday, November 29, 2011

The Warehouse Group CEO Mark Powell on new turnaround strategy

Share Investor Q & A: Reader questions to Warehouse Group CEO Mark Powell (UPDATE)

Wednesday, September 21, 2011

The Warehouse Group Ltd: Brands the answer to a turnaround

Thursday, May 5, 2011

The Warehouse Group Ltd: Takeover Speculation Resurfaces

Wednesday, February 9, 2011

The Warehouse Group: Tips for the new CEO

Monday, January 17, 2011

The Warehouse Group: Should Ian Morrice Go?

Monday, January 10, 2011

Has the Warehouse lost its Mojo?

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