Warehouse Court of Appeal decision in Commerce Commission's favour

8.58am The Court of Appeal has overturned the High Court's ruling allowing rival grocery firms to bid for The Warehouse[WHS] by Foodstuffs and Woolworths Australia.

The Commerce Commission case argued that if either Woolworths or Foodstuffs bought The Warehouse, it would result in a "substantial lessening of competition".

This was after the Commerce Commissions case was defeated in the High Court in 2007 and an appeal against that decision was lodged earlier this year.

Trading in The Warehouse shares was thin yesterday, July 30 (NZ time), and price movement was mildly upwards during intra day trading but finished flat, so no pre announcement indications could be gleaned from the markets.

The sale process began almost 2 years ago but has been stymied by the Commerce Commission due to their contention that a purchase of The Warehouse by either Foodstuffs or Woolworths would impact to the detriment of food consumers. The Warehouse, Foodstuffs and Woolworths all argue that The Warehouse food offerings are not significant or successful enough to warrant a Commerce Commission appeal

It is likely that Foodstuffs, Woolworths and The Warehouse will appeal the Court of Appeal's decision to the Supreme Court in Wellington.


The Warehouse @ Share Investor

Why did you buy that stock?[The Warehouse]
The Warehouse set for turbulent 2008
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

Disc I own WHS shares

c Share Investor 2008 & Cartoon Emmerson 2008

Starbuck's New Zealand cup doesn't runneth over

News from the USA that around 600 "unprofitable" company owned Starbucks stores are to be closed and that similar things are happening in Australia, with 61 of 84 stores closing, is bad news for investors in the franchisee operator of Starbucks in New Zealand, Restaurant Brands [RBD.NZ].

Bad news because it is an indication of how many of RBD's franchised stores are losing money.

"Any announcements internationally won't have any effect on the way we do business in New Zealand...the New Zealand operation continued to trade strongly", said Paul Wood, GM of Starbucks in New Zealand, in reaction to Howard Schultz', Starbuck's global CEO, announcement of the closures.

Regular readers of mine will know that I don't agree with Paul Wood's contention. I would argue that the Schultz announcement confirms my suspicions that Kiwi Starbucks are losing money.

Paul Wood maybe right when he says the local Starbucks is "trading strongly", although that is up for argument- small sales increases have come from price increases which haven't kept pace with inflation and rising business costs- but what he didn't say was if they were trading profitably.

RBD's Starbucks are suffering from excessive cost structures. Their leases, especially in their high profile stores, are prohibitively high. That has been the case since the brands arrival here in 1998.

Of late, other running costs have impacted on the size of the loss. Rising coffee, electricity and labour costs are among just a few attacks on the expensively priced coffee makers ability to make money.

The increasing amount of competition for the coffee buck in New Zealand has also made things look bleak for any promise of a profit anytime soon.

McDonalds especially has taken custom off Starbucks. Their lower cost and sometimes better quality offerings has had a severe impact. The fact that the Big Mac has a drive through service while Starbucks is devoid of both that and fast in-store service means revenue increases will not come until something has changed.

There is also a myriad of other competition like Robert Harris, Gloria Jeans, Dunkin Donuts and a whole host of smaller chains, "coffee-to-go" installations and independent operators. Most of which were not around when Starbucks opened here 10 years ago.

After years of losses, the promise of profit for Restaurant Brands Kiwi Starbucks looks even further away than it did at its introduction to this country. Its only hope for real increased sales is to dramatically increase store numbers but that is the very reason the brand got into trouble here in the first place-too much overhead not enough custom.

As RBD are contemplating selling their loss making Pizza Hut chain, the only hope for pegging back theirs and their shareholders losses from the Starbucks brand is for it to be sold as well.

The alternative will be a similar announcement to that of Howard Schultz.

Starbucks[SBUX] shares were up 76 cents at US$14.99 on the New York Stock Exchange and at near year lows look good for a recovery under the eye of the founder once again.


Restaurant Brands @ Share Investor

RBD gives KFC a push
McDonalds playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures


Related Amazon Reading

Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time by Howard Schultz Buy new: $9.55 / Used from: $0.14 Usually ships in 24 hours

c Share Investor 2008

Winston Peters lost in Wonderland

Rodney Hide (left) and Winston Peters.

• Peters addresses allegations in Parliament today
  

Winston Peters used a couple of quotes from Alice In Wonderland in his members speech less than an hour ago.

One quote he used was directed at journalists and politicians from the National Party and its central meaning goes something like this:

If you don't know what you are talking about shut your mouth.
Winston Peters, July 30 2008

I would counter that with another quote from Alice in Wonderland, made by Alice herself. It is a direct quote:

"If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn't. And contrary wise, what is, it wouldn't be. And what it wouldn't be, it would. You see?"
Alice

While we are quoting Alice in Wonderland, It is clear that Winston Peters has been taking his response to serious accusations of corruption, bribery and secret donations from a fairy tale.

In his members speech today he attacked the media, opposition politicians, and went into great detail. When asked where donations to his party went though-why secret donations were not declared, who they came from and what was done for the donors to get the donations, Winnie the Pooh is deathly silent.

Peters clearly lives in a world where up is down, down is up, black is white, white is black and secret donations to an individual or party are not really donations but gifts of little consequence.

Back to Alice.


"What is the use of a book, without pictures or conversations?"
Alice

Helen Clark should be asking for more from Peters but continues to live in Wonderland herself. She simply wants to stay in power.

This leaves the public asking themselves when they will get answer from Winston Peters and Helen Clark. It leaves us all feeling:

"Curiouser and curiouser!"
Alice

The last word though should be left to the Mock Turtle from Alice In Wonderland, for it sums up our collective thinking to Winston Peters and his denial of corruption in the face of clear evidence and his repetition of an attack mantra upon his accusers.

"What is the use of repeating all that stuff, if you don't explain it as you go on? It's by far the most confusing thing I ever heard!"
The Mock Turtle



Related Political Animal reading

Winston Circus hangover continues
Discretion was the essential part of Vela Donation
Winston Peter's Glenn donation scandal: But wait, there is more!
Peter's hangs himself in February Paul Henry Interview
Peter's admits lying about Glenn donation
Winston's silence is telling
Labour gets tangled in Peter's lies
Leaked Glenn Email
Winston got secret donations from Owen Glenn
The Owen Glenn Story: Singing the same tune but hitting a bum note

c Political Animal 2008

Don't forget Money Managers

In the wake of big coverage of late over the collapse of Hanover Finance last week and 25 other finance companies going to the wall, I thought I might revisit a subject that I have covered since I started writing on the Internet.

Doug Somers Edgar, his Money Managers (MM) company and the myriad of companies within that structure-some of them second rate finance companies-that "lend" money to each other have a host of similarities to some of the finance companies that have collapsed over the last 2 years.

Inter-company lending is just one factor that Money Managers uses to not only clip the ticket but to finance risky lending for dubious projects, to companies closely affiliated or part owned by MM interests. Many projects have fallen over, just do a Google search of Doug's full name and you will find a long list, he does when searching for individuals to sue and has landed on Share Investor.

That is where we get to the crux of my column today. We have seen alot of ballyhoo and publicity over the Eric Watsons and Rod Petricevics of this world and their part played in finance company losses, and rightly so, but our friend Doug Somers seems to have been largely lost in the sheer number of collapses.

While other financial collapses have made top of the bulletin news casts and front page mainstream coverage, Doug's MM gets coverage in blogs and weighty financial tomes such as the National Business Review.

I dont fully understand mainstream medias hands off attitude to Money Managers and their money magician former svengali and now minor shareholder, Doug Somers Edgar.

Lets correct the balance here then.

Just this last Sunday 27 July, in the wake of the Hanover collapse, NZ$ 60 million has been put at risk from Money Manager's Totara First Mortgage becoming insolvent and repayments to investors suspended

At the beginning of June 2008, the latest in the massive First Step losses reveals a slowdown in promised repayments to out of pocket investors. There is NZ $38 million lost and $108 million of investors money at risk in the wound down First Step vehicle. Some of the money at risk is owed by a MM owned company Club Finance.

As the economy moves deeper into recession and individuals and companies who have lent money off finance companies and related party lenders, some of them within the Money Managers fold, have trouble paying back money, there will be further losses incurred by investors in Money Managers.

Keep it tuned here.

Related Share Investor reading

Money Managers First Step gives investors the middle finger
Money Managers First Step saga: 3 Story wrap

c Share Investor 2008