I would have thought it was one of their main selling points. A sony tv is a sony tv so unless you compete on price, you compete on something else, ie. flybuys.
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The mood at TWL certainly seems to be very up-beat about the purchase, especially from Mark Powell.
Looking over the numbers, and the competitive nature of electronics, I'm not so sure if it was the right move. Obviously, the ability to get into the lucrative brands such as sony, panasonic, etc for TV's and the likes is good. However, one only has to look at the fall from grace of JB HIFI, Harvey Norman, etc over the past few years to see how much of a competitive and cyclic industry it is, one that is very dependent on the loosening of credit and spare cash to spend for consumers.
Saying this however, TWL has tried expanding into Australia and failed. Tried matching Foodstuffs and Progressive by going into grocery and failed. What else is there left to do with regards to expansion. Warehouse Stationary and Warehouse stores are just about everywhere they need to be all over NZ. Opening new ones will only take away sales from current stores. As what has been seen with some of it's new stores.
Retail sector and TWL as an investment... I wouldn't go near it right now personally.
The Leeming purchase makes sense to me.
The purchase price isn't particularly expensive and the retail cycle is at a low.
WHS can't even offer a browngoods product that would entice me to look let-alone purchase. Whitegoods are worse. Buying Noel Leeming side-steps a supply chain issues for WHS (Major retail competitors stopping manufacturers from supplying). Economies of scale must be available from both volume and procurement perspective, perhaps even marketing. There are potential opportunities from a "store-with-a-store" perspective if WHS doesn't have the pulling power in this category.
Demographically, first home buying (and therefore white & brown goods sales) will pick up in the next 3-4 years - probably just enough time for WHS to position.
CEO said they purchased this debt free on the news tonight , so maybe a bit of a bargain ....
WHS are pretty good operators in their core space.
They have very good buying teams (including an office in China), very efficient warehousing and distribution in NZ, some of the best IT systems in NZ business and a solid marketing department. These are all things they can help NLG with which has never really been able to invest in much.
Generally they are, spreadsheets and access databases (ie stopgaps) everywhere.
I had the pleasure to work a bit with the WHS team once and the difference couldn't have been greater. NLG was always at the other end, all kinds of incompetence on the smell of an oily rag.
It seems ST posters investors and Mr Market are not worried about the deflationary environment.
I think this deflation environment factor is just as important or more important than the synergies and almagamations of similiar operations, increased efficiencies, availabilities and accesses to new suppliers and customers, as well as extra efficiencies through shared data bases that the company as a whole will be able to obtain though this buy up.
So I'll harp on about this deflation thing like a dog with a bone.....as doing business in a deflationary environment requires a whole new set of skills, a change of operating behaviour, thinking and a set of business strategies to try these disciplines together ....
If a company decides to enter into a deflationary segment of business they should already have a business strategy available to cope with that environment they are entering. WHS Investors should educate themselves so as to identify the behaviour and strategies that WHS will adopt and they will be in a position to judge if WHS has made the right set of choices.
Amazingly there is scarcely any data on the internet about application of business strategies during deflationary times....I now know why big tech companies are having big losses. I thought there would be info from Japan as they have had a type of deflationary environment for 20 years now yet the research is hard to find
I found this little very simple snipet from http://www.gaebler.com/Business-Stra....unfortunately it hardly scratches the surface but it gives shareholders an idea of what they should be looking at and researching for more detailed info when investing in a company that is operating in an deflationary sector of the economy. The shareholders can then be able to question the company on its business strategies that it adopts.
Strategies for Business Owners
- Plan for multiple scenarios. Scenario planning is the best business defense against deflation. A typical scenario might see across the board price decreases and belt-tightening. If you've planned ahead, you will be prepared to deal with the possibility of supply cost increases while the prices you charge for your products is forced down.
- Avoid long-term vendor contracts. If you believe that deflation is likely to occur, avoid locking yourself into long-term contracts with suppliers and vendors. Instead, let the market dictate the cost of supplies and buy short-term. Conversely, you'll want to lock your customers into long-term contracts as soon as possible.
- Consider buying capital. If you've planned ahead, deflationary periods can be ideal times to purchase capital, especially when equipment prices drop at a rate that is equal to or greater than the average rate of deflation.
I was listening to Mark Powell on News Talk ZB last night and thought he explained the purchase decision of NL rather well. He seemed pretty down to earth and honest.
Forsyth Barr not seeing real value in the purchase.
They've also downgraded their recommendation from "hold" to "reduce".
http://www.nbr.co.nz/article/warehou...-buy-dw-133794
Hoop - I think The Warehouse and others have been struggling with price deflation for a few years now .... most have been selling more things and making less money
Maybe greedy landlords and staff with expectations of a pay rise every year need to play a role ..... then they can get even more ecrewed by councils and rates and electricity companies with their power bills .... sad world eh .... tearing itself apart in an unsustainable way