WHS - Warehouse Group

[Beagle]

Warehouse has how many stores in N.Z. ? Two hundred and something if my memory serves me correctly. Answer is sure to be in here somewhere http://nzx-prod-s7fsd7f98s.s3-websit...579/345273.pdf
Say Costco does open one store in Westgate, so what ? I live in one of the best suburbs in West Auckland but its still an annoying 30 minute drive each way (outside of peak hour traffic, much more during peak hour) to see one of my best mates in Westgate. My point is, travelling within Auckland is now a nightmare no matter what time of the day. Took me 15 minutes each way to drop off my granddaughter to the next suburb from where we live last evening...(thanks for the hospital pass Mrs B). The traffic and cost of commuting in Auckland is diabolical.
Sure Costco will have some pull in Westgate and immediate suburbs surrounding but there must be dozens of Warehouse suburban stores in Auckland and my closest is about 7 minutes drive away. Time and commuting cost is also money.

[winner69]

Warehouse has how many stores in N.Z. ? Two hundred and something if my memory serves me correctly. Answer is sure to be in here somewhere http://nzx-prod-s7fsd7f98s.s3-websit...579/345273.pdf
Say Costco does open one store in Westgate, so what ? I live in one of the best suburbs in West Auckland but its still an annoying 30 minute drive each way (outside of peak hour traffic, much more during peak hour) to see one of my best mates in Westgate. My point is, travelling within Auckland is now a nightmare no matter what time of the day. Took me 15 minutes each way to drop off my granddaughter to the next suburb from where we live last evening...(thanks for the hospital pass Mrs B). The traffic and cost of commuting in Auckland is diabolical.
Sure Costco will have some pull in Westgate and immediate suburbs surrounding but there must be dozens of Warehouse suburban stores in Auckland and my closest is about 7 minutes drive away. Time and commuting cost is also money.

90 Red Sheds 488,000 sq m of floor

164 other stores

90 stores is about saturation for NZ ....most efficient level is probably a little less than 90

There used to be a rule of thumb retail analysts liked quoting about Red Sheds ....the more footprint they added the less efficient they got ...like make the same or less profit.

[LaserEyeKiwi]

They actually closed 3 TWL stores last year, and opened 1. Same store sales revenue was actually up 6% for TWL.

Aim is for 40 of those 90 TWL stores to have a Warehouse Stationary store inside them once that SWAS project is completed.

makes me wonder actually how the revenue is broken up from those. For instance i’m guessing warehouse stationary revenue is not included in TWL revenue for reporting purposes, meaning the revenue from those existing warehouse store locations is perhaps actually increasing substantially, but it’s not apparent in the top line reporting, but would be contributing a large gross margin improvement.

[850man]

Warehouse has how many stores in N.Z. ? Two hundred and something if my memory serves me correctly. Answer is sure to be in here somewhere http://nzx-prod-s7fsd7f98s.s3-websit...579/345273.pdf
Say Costco does open one store in Westgate, so what ? I live in one of the best suburbs in West Auckland but its still an annoying 30 minute drive each way (outside of peak hour traffic, much more during peak hour) to see one of my best mates in Westgate. My point is, travelling within Auckland is now a nightmare no matter what time of the day. Took me 15 minutes each way to drop off my granddaughter to the next suburb from where we live last evening...(thanks for the hospital pass Mrs B). The traffic and cost of commuting in Auckland is diabolical.
Sure Costco will have some pull in Westgate and immediate suburbs surrounding but there must be dozens of Warehouse suburban stores in Auckland and my closest is about 7 minutes drive away. Time and commuting cost is also money.

Will Costco be doing online trading? If the 25-30% lower price is apparent here then online trading could take a good bite out of everyone's lunch.

[LaserEyeKiwi]

Will Costco be doing online trading? If the 25-30% lower price is apparent here then online trading could take a good bite out of everyone's lunch.

everyone’s aware Costco has a large annual membership fee right? About $100 a year. It’s an interesting business model, but by design prevents many lower income people from using them.

[Dlownz]

everyone’s aware Costco has a large annual membership fee right? About $100 a year. It’s an interesting business model, but by design prevents many lower income people from using them.

TheMarket run by WHS has a subscription service. It's 5.99 a month and get your free shipping

[iceman]

everyone’s aware Costco has a large annual membership fee right? About $100 a year. It’s an interesting business model, but by design prevents many lower income people from using them.

Costco opened up in my old home country a few years ago, in a city or rather 3 cities with a combined population of around 200,000. About 75% of households now have an active membership. It completely changed the retail landscape and lowered prices on almost everything.
But most affected were petrol retailers when Costco started supplying petrol MUCH cheaper than others, so much so that people would drrive there for the petrol discount and do their shopping at the same time, also cheaper than competitors.

The other surprising losers were wholesalers/importers.. Nearly all food service businesses, being your local dairy, restaurants, ice cream parlour, you name it, found their ingredients much cheaper to bulk buy at Costco than from previous suppliers.

So I'm less worried about competition to WHS than I would be for holdings in ZEL, supermarket chains etc

[SBQ]

Where I grew up, Costco came in 1993 and my uni friend (that started working there since college) pursued a career in accounting. His work at Costco on the floor moving stock around, doing customer support, and eventually into accounting. Shortly after graduation he was recruited at head office in Canada back east and that was the last I saw of him. During the last visits together, I told him I was on my way moving to NZ and showed him my change in tax status with Revenue Canada. It was interesting times because most Uni students don't get the chances we did by moving away in great distances. Anyways, I asked him (this would be around 1999) why has Costco not pursued into opening up in New Zealand? The inside info he told me was head office was considering Australia to opened up (note at that time Costco Seoul Korea and in Taiwan was already operational). He told me that the problem (and he was doing account at the corporate head office level) was that NZ is a very small market place and worse of all, the supply chain would be a difficult issue in that pretty much, their whole product lines would have to be imported into NZ. For those not familiar with Costco, not every warehouse has the same product line. Where I grew up they sometimes sold snow mobiles but you would not find that in say Vancouver Costcos. I'm not sure how this would reflect in NZ but if the local supply chains prove difficult, there may not be much of a go here if the prices are not low enough. We all know the duopoly food retailers in NZ have a very tight lid on the supply chain. Likewise with many industries like Fletcher building.

Membership has benefits and for good reason. My uni friend informed me that the annual membership fee is a big revenue maker and I believe it. But there is a key reason for this approach and I will attest to it. What it does it filters out those who are really Costco shoppers and those that are marginally not, and I hate to say it but it gives an exclusive level of shoppers; typically those from higher incomes. Where I grew up you NEVER saw and bums or those on the low end shopping in Costco as for starters, they catered to high volume LARGE BULK SIZE shopping - rarely you would walk out spending less than $200 because items like toilet paper were sold in such large size that you would only buy it once every 2 or 3 months. Those on the low income don't have that kind of level of spending, nor would bother paying for annual membership. But the savings are there. In the same hometown where I grew up, Costco brought in petro station and the impact was severe. As in the previous post the price difference was considerable that people spending $150+ to fill up their pickup truck knew the savings was enough to drive from 1 side of town to Costco (figure 15% price difference). My friend told me it was a god sent when Costco opened up their petro stations because for several years the locals complained about price fixing by all the petro stations. Now that the table had turned around, they had to lower prices to be more competitive but I would say during a course of 3 years, half of these petro stations closed up.

@ Beagle:

Again, not sure how this flows in NZ but it will be interesting to see if Costco will manage some price control. I would imagine most of the items would be imported but here's one key distinction that other retailers don't have. Costco is known to sell the 'surprise factor' of items on the floor where you just WANT IT but know no one else in the country has and because of this, you can be many will make that long journey to Costco just to buy it.

As for online purchases, it took a very long time for Costco to offer that service but the problem is more to do with regional supplies. Not every Costco sells the same item so what you would see online would be very generic items.

[LaserEyeKiwi]

They actually closed 3 TWL stores last year, and opened 1. Same store sales revenue was actually up 6% for TWL.

Aim is for 40 of those 90 TWL stores to have a Warehouse Stationary store inside them once that SWAS project is completed.

makes me wonder actually how the revenue is broken up from those. For instance i’m guessing warehouse stationary revenue is not included in TWL revenue for reporting purposes, meaning the revenue from those existing warehouse store locations is perhaps actually increasing substantially, but it’s not apparent in the top line reporting, but would be contributing a large gross margin improvement.

So I contacted WHS investor relations yesterday enquiring how the revenue for Warehouse Stationary Store-within-a-store (SWAS) is reported at earnings, and got a reply:

‘Thank you for your email enquiry, all Warehouse Stationery revenue and results - both standalone stores and SWAS - are all included in the Warehouse Stationery results.’

Needless to say, this dramatically changes how I perceive the TWL segment results.

TWL revenue (“The red sheds”) was up 6% on a same store basis last year. But this excludes all revenue from warehouse stationary stores that have been located inside TWL stores. Therefore the true amount of same store revenue growth at The warehouse locations is significantly higher - and supports the increasing company wide profit margins.

WHS does not have to pay much of anything extra in operating costs to operate those SWAS - other than a couple of extra staff on duty at each location - but brings in significant amounts of extra revenue at those existing locations. It doesn’t show up in TWL segment results, but it does on the WHS company wide profits.

Looking at warehouse stationary alone, I would say the target is to reduce costs there as much as possible by eliminating as many standalone stores as they can and replacing with SWAS and online fulfillment, while maintaining select standalone locations in major business hubs. If I had to guess I think warehouse stationary revenue growth will be low, but profits will increase significantly.

Although would be interesting to know how they apportion costs of the SWAS locations. For instance is WS segment taking on operating outs of a shared location based on their share of the buildings footprint? If so, then the increased profits might show up in the TWL segment instead (as its share of a locations operational costs fall)

there are currently 20 SWAS, and they are aiming for 45 (about half of red sheds locations)

[BlackPeter]

The Warehouse is in the herald ... and their name is mentioned in the same paragraph together with amazon, alibaba, wechat and weibo. Big digital plans, if it works out great things to come.

https://www.nzherald.co.nz/business/...I3DEN4HJ5EOZQM
[paywalled]