The Warehouse has been a household name for nearly 30 years. Quite incredible that it is not only a retail icon but also part of our lives as a living retail environment. It is the epitome of our retail culture and it probably leads our retail exposure internationally. It has much less influence than, say, Walmart in the USA (the largest department store chain in the US and the largest supermarket chain in the US), but it is probably our closest equivalent. The Warehouse also influences our retail property environment, occupying nearly half a million square metres of space and “anchoring” many major shopping centres. So how is it really performing?
We have followed this brand since its inception; in fact, RCG has been involved in a number of store developments. However, has The Warehouse lost some of its glamour, and are consumers turning their backs on this NZ retail giant? The brand grew from the 1980s when shopping was just a 5-day exercise. As extended trading emerged, so did the popularity of TWL. The brand grew from a small store on the North Shore in Auckland to a national chain represented across the country in small regional locations to major cities. The Warehouse increased their store sizes to cope with a larger product offering, they expanded into a proposed supermarket offering and they also went offshore to Australia. By 2009 the company had substantially changed its management structure and was caught up in the GFC. So how did it cope? Not well in our view. We have monitored the “sales per capita” of the chain since its inception – sales in the red sheds, per head of population. In 1991, TWL’s sales per capita was $31. Now, in 2011, sales per capita are $332. A major increase over that time, but when you look at the last eight years it is apparent that this performance has not only plateaued but fallen over this time. In 2003, The Warehouse had sales per capita of $335, and in the years in between 2003 and 2011 this figure rose, peaked in 2007, and has fallen every year since.
The Warehouse Group recently announced that it will make a $430 million capital investment over the next five years, suggesting that a change to the stores is about to emerge. However, it seems a long time coming. Most stores look and feel either the same or at best slightly improved, but that’s about it. Merchandise is similar to what it was previously but the store “spark” has deteriorated. The share price has also faltered, and the current October 2011 price is $3.34 compared to $5.70 in 2003. This signals a significant decline in investor performance. So what’s gone wrong? Many things have influenced the current status. The larger store footprints to handle the expected supermarket business that failed, has left many stores with simply too much retail space. Add to that the decline in the DVD and Music industry and there is simply not enough sales and profit in this area. The apparel component simply has not worked. The introduction of in-store brands has not gained consumer support and competitors such as Kmart and Farmers have, in our view, had a huge impact on the TWL apparel offering. The familiar “Where Everyone Gets A Bargain” slogan has been lost on consumers as every other retail environment is offering the same deal, even if they don’t say so.
Is the group ready for a takeover or change? It must be. The brand cannot continue to mooch along in a framework that looks tired and uninteresting without a decent shot in the arm. So what will The Warehouse do? Management has changed with an obvious view to improve the culture and the overall results, but the process from the outside looking in seems slow and lethargic. We suggested some months ago that this would be a demanding task for the new CEO, and we haven’t changed that view. The busiest season of all is approaching with the lead up to Christmas, together with Boxing Day sales. If the group do not perform during this period, the writing well may be on the wall. We hope not, we love the brand too much to see it decline further or at worst disappear. Lets hope we see some robust activity, from marketing to merchandise to value, to encourage sales performance over the next two months.
SHAREWATCH – HALLENSTEIN GLASSON HOLDINGS
Hallenstein Glasson Holdings has announced its annual results for the year to July 2011, which have been well received by the market. Sales from the Glassons womenswear chain in New Zealand fell to $89.1 million, with profits also falling. In Australia, Glassons fared worse, making a small loss.
Hallenstein menswear stores increased sales slightly to $74.4 million, with profits also growing. Interestingly, the seven-store Storm chain, which aims at a higher market pitch than Glassons, is emerging as a very successful part of the business. Out of the three chains, Storm made the highest profit as a percentage of sales, and also seemed to have the highest return on equity. As awareness of the brand continues to build, Storm could have a very bright future.
Overall, Hallenstein Glasson Holdings had a reasonable year, with profits down slightly. Importantly, the company has done a good job at maintaining profitability through some hard economic times, and except for the 2008 and 2009 financial years, profits haven’t been too far below what they were before the recession. How many other NZ retailers can say the same?
IN THE PRESS
LOCAL AND INTERNATIONAL MEDIA HIGHLIGHTS 25 – 31 OCTOBER 2011
Guacamole maker lands Oz deal
Fressure Foods, a Pukekohe guacamole maker, has landed a deal with Australian supermarket giant Coles which has the Fressure products lining the shelves of more than 800 Coles stores. General manager of Fressure Foods Graeme Laurence said the initial order of about 15,000 cases to stock up the stores was a 30-40 per cent boost to his business.
(Source: NZ Herald)
New range shapes lingerie’s online presence
Stefan Preston, former helmsman of New Zealand lingerie brand Bendon, is strapped in for the launch of his affordable new lingerie label Rose & Thorne. Available from November 20, the range is said to have an innovative sizing method allowing consumers to purchase the bras online after one fitting.
(Source: NZ Herald)
Checkout-free supermarket revealed
A US inventor has revealed a futuristic supermarket retailing model which eliminates checkouts and revolutionises behind the scenes stock control. It also provides retailers with added-value benefits like real-time pricing updates throughout a retail chain, improved inventory management, enhanced customer loyalty, and increased shopper conversion rates.
(Source: Inside Retailing)
Deluxe mall opens in Morocco
The brand new Morocco Mall is scheduled to open on December 5 in Casablanca, Morocco’s largest city. The new mall is said to be a sign of the country’s transition to a modern era of commercial retail business. About 600 brands including newcomers to Africa such as Imax cinema and FNAC, will be occupying space in the three level mall.
(Source: Inside Retailing)
Melbourne’s Massive homemaker centre opens
All bar one tenancy in the massive Springvale Homemaker Centre in Victoria has opened – the largest home maker centre in the Southern Hemisphere. The 72,000sqm complex, anchored by a giant Ikea store, opened this month and is also home to almost 30 other leading retail brands.
(Source: Inside Retailing)
