WHS - Warehouse Group

[Balance]

Shame about the $22m impairment on the Financial Services side of the business

And this was going to be a game changer

But maybe hope - still in 'pre-launch' whatever that means

This is what WHS announced when it raised $115m of new equity in March 2014 as part of its strategic move into financial services:

1. Ambition to be a 'Leading NZ Retail financial services company'.

2. Financial Services will lose up to $3M after tax in FY14 and FY15 as the business base is developed.

3. But the growth of product range and receivables portfolio should result in a positive contribution from Financial Services by FY16.

As it turned out, the Financial Services business showed a loss of $2.7m in FY16 and we now read that FY17 showed an increased loss of $5.2m! Basically means that this business is running behind schedule by 2 years! Hence, the 'pre-launch' excuse?

As for the $22.5m goodwill impairment write-off being 'non-cash', history tells us that simply means that the cash was spent in previous years and was capitalized (hence, making previous years' profits look better). It is a very real adverse cash and profit impact indeed!

No wonder the institutions who supported the equity raising are selling out? Hard to see any positives coming out of WHS from this results.

[bull....]

warehouse should ditch have of the s.it they sell and close all noel leaming and warehouse stationary stores and fold them all under one roof- save heaps on lease costs, staff costs, head office costs etc etc and then rebrand get rid of the warehouse brand its had its day. but i guess the new guy supported by the board will continue to waste millions on a no hope situation in its current state.
gee when the warehouse closes one day there be lots of mall spaces around.

[Balance]

http://www.nzherald.co.nz/business/n...ectid=11818080

Some insightful comments from Rod Duke - Briscoe's profit and market cap now both bigger than WHS!

2 notable points :

1. Kiwis are over cheap rubbish. Perception of the WHS after years of restructuring is that it still sells cheap rubbish.

2. The likes of Amazon, Ebay & Alibaba will impact the most on certain categories like books, clothings, toys etc. WHS is still busy selling these items!

Long road ahead for WHS - it has got plenty of retail space (used to be its claim to fame) but a lot of that space is now used for stocking and selling sunset goods. Meanwhile, lease payments are ballooning higher and higher, one side effect to the sale and leaseback strategy.

PS. Reminder to oneself - NEVER buy into a sustained downtrend!

[Beagle]

http://www.nzherald.co.nz/business/n...ectid=11818080

Some insightful comments from Rod Duke - Briscoe's profit and market cap now both bigger than WHS!

2 notable points :

1. Kiwis are over cheap rubbish. Perception of the WHS after years of restructuring is that it still sells cheap rubbish.

2. The likes of Amazon, Ebay & Alibaba will impact the most on certain categories like books, clothings, toys etc. WHS is still busy selling these items!

Long road ahead for WHS - it has got plenty of retail space (used to be its claim to fame) but a lot of that space is now used for stocking and selling sunset goods. Meanwhile, lease payments are ballooning higher and higher, one side effect to the sale and leaseback strategy.

PS. Reminder to oneself - NEVER buy into a sustained downtrend!

Couldn't agree more. Whether just consumer perception or reality the perception amongst people I talk too is Warehouse generally does not sell good quality merchandise. (Caveat: Mind you I am hardly WHS's target market customer).

[Biscuit]

Couldn't agree more. Whether just consumer perception or reality the perception amongst people I talk too is Warehouse generally does not sell good quality merchandise. (Caveat: Mind you I am hardly WHS's target market customer).

There will always be a good market for cheap rubbish. The problem isn't the product, its the perception and the competition. People buy even more cheap rubbish than ever, they just get it on Trademe, Briscoes etc.

[h2so4]

Always bought my Cadbury marshmallow centered easter eggs there. Seemed to be alright.

[h2so4]

....mmmmmmm

[Beagle]

There will always be a good market for cheap rubbish. The problem isn't the product, its the perception and the competition. People buy even more cheap rubbish than ever, they just get it on Trademe, Briscoes etc.

I agree that there will always be a segment of the market and a pretty sizeable one at that where people must buy the cheapest product out there that does the job but quite aside from the old cliché which is one of my favorites that "the bitter taste of poor quality lingers long after the thrill of a bargain" the thing is when you go into a Briscoes store the perception is, (well mine is for what that's worth), that you're buying product someone around the middle of the market as opposed to cheap rubbish.
For example we updated our cutlery before Christmas, (the stuff my wife and I were given at our wedding 25 years ago was very tired) with some very nice Simon Gault cutlery at Briscoes and have found it to be very good quality and it was at quite a reasonable price when acquired when on sale at 50% off.
I think this explains why Rod Duke is doing so well. He creates the perception of pretty good quality at a fairly reasonable price and I think that's what most people want, well most people I know.

[Balance]

I think this explains why Rod Duke is doing so well. He creates the perception of pretty good quality at a fairly reasonable price and I think that's what most people want, well most people I know.

Also, Briscoe stock the full range of products - from cheap to very expensive. The very expensive (eg. Scanpan, Tefal and Wustof) tends to uplift the whole store's image.

WHS does not stock the full range and when it has upmarket brands like Apple or Sony, it sells but a few items of that brand. Heck, most brands would not want to be associated with the Warehouse!

Think how often you go into Briscoe intending to buy something on special and walk out with something more upmarket for 20% or 30% more, and thinking you made the right decision.

[Beagle]

Also, Briscoe stock the full range of products - from cheap to very expensive. The very expensive (eg. Scanpan, Tefal and Wustof) tends to uplift the whole store's image.

WHS does not stock the full range and when it has upmarket brands like Apple or Sony, it sells but a few items of that brand. Heck, most brands would not want to be associated with the Warehouse!

Think how often you go into Briscoe intending to buy something on special and walk out with something more upmarket for 20% or 30% more, and thinking you made the right decision.

That's spot on Balance. Fact is there was a whole range of cutlery in there, from stuff that would most likely bend or break pretty quickly to the stuff we bought that will probably last us another 25 years.
On the other hand I wouldn't even contemplate going to the Warehouse for cutlery, what's the point of buying utensils that you know on the balance of probabilities won't last a reasonable period of time ?
As you suggest, there's probably many brands that don't want to be associated with the Warehouse so WHS can probably never achieve a decent spectrum of product quality in any particular range of merchandise even if they wanted too. I think its this key fact that compromises the WHS's business model going forward, (along with their other challenges), and no amount of restructuring can change that.
The exception in my view is the Noel Leeming stores that I continue to expect to do well given Dick Smith's demise.