KEY POINTS:
The Court of the Appeal did not buy the line that The Warehouse's attempt at one-stop shop supercentres, branded as "Extra" stores, is a failure.
The court has prevented supermarket chains Foodstuffs and Woolworths launching takeover bids for The Warehouse, overturning a High Court decision. The full judgment was released on Friday.
The Warehouse has opened three Extra stores - in Whangarei, Sylvia Park in Auckland, and Te Rapa in Hamilton. They sell food as well as general merchandise. Supercentres have been a success in the United States and Europe but it took a while. Their success relies on a "halo" effect of increasing general merchandise sales through attracting customers to buy groceries.
The High Court heard that The Warehouse was uncertain whether the concept would continue and that it was not viable to continue with three stores alone.
In its judgment, the Court of Appeal said it had the benefit of an update from the company. A halo effect had emerged at the Whangarei store and a profitability turnaround had been achieved at Te Rapa. But three stores were not enough to get supplies at the same prices as competitors did.
"We do not share the High Court's confidence that the evidence of Extra's impact on Woolworths and Foodstuffs to date demonstrates that it is unlikely to have any competitive impact in the future," the Court of Appeal said.
The court acknowledged that Extra stores were disappointing up until July 2007. But it said the case could not be determined by arguing the Extra stores would be abandoned.
- NZPA
