KEY POINTS:
The Warehouse's much-heralded push into the grocery market is floundering, which could play into the hands of those fighting to take the retailer over.
The company's first Warehouse Extra store - its mixed grocery and general merchandise offering - in Whangarei has been open for nine months, but chief executive Ian Morrice said at the annual results yesterday that it had proved a disappointment,
It has failed to meet sales targets and start-up costs have been higher than expected.
Indeed, from what Morrice said it sounds as if the store is struggling on all fronts: wastage of fresh food has been more than expected, labour costs have been higher, and it has battled with distribution, meaning customers can't find all the goods they want in the stores.
So The Warehouse has said it won't add to the three Extra stores it already has for at least 12 months while it sorts out the problems at the existing stores.
Pushed yesterday on how committed The Warehouse is to its Extra stores, Morrice sounded less than convinced that the company would stick with the grocery strategy. He said improvements could be made to Extra, but ultimately the company would do what was in the best interest of its shareholders.
So now it looks as if The Warehouse may not prove to be a third force in New Zealand grocery retailing after all.
The potential for The Warehouse to shake up the grocery market was the reason the Commerce Commission blocked both Foodstuffs and Woolworths in their applications to be allowed to take the company over. The commission ruled that The Warehouse had the potential to be a "maverick" competitor in the grocery sector and could drive prices down at the other grocery operators.
But that reasoning falls over if The Warehouse's grocery expansion is in doubt - a point the parties are likely to make at their High Court appeal next month.
Simpson Grierson competition lawyer James Craig says any new evidencethat Extra was not performing wellcould be admitted in court and couldprove relevant to the case.
Shares in The Warehouse fell 10c to $5.85 after yesterday's result before closing flat at $5.95.
That's not surprising. Aside from the disappointing result from Extra - which has to have provided the next phase of the company's result - Morrice presented a pretty dour outlook for the coming year.
But if yesterday's poor result helps to get the Commerce Commission's ruling overturned, then the takeover battle for The Warehouse might begin in earnest.
And that will prove good news for shareholders.
Farewell
This is my last column for the Business Herald as I've resigned as business editor to return to Australia.
From Monday, deputy business editor Liam Dann takes over both this column and the business editor's chair.
In the seven years I've been in New Zealand, there's been much hand-wringing about the hollowing out of the local economy - whereby the control and ownership of the country's productive assets fall into overseas hands.
I'd love to be able to say things are getting better, but there's little evidence of that. Companies are still disappearing off the sharemarket and being bought by foreigners.
Only this week we saw US Fortune 500 company Henry Schein raise its takeover bid for Software of Excellence, meaning that the dental software company will probably become the latest entity to be removed from the board of the NZX.
And on Thursday the company's biggest boatbuilder, Rayglass, confirmed that it had been swallowed by United States marine giant Brunswick.
New Zealand does a lot of things well, but holding on to its small, innovative companies so they can grow into large companies and provide wealth and jobs isn't one of them.
It is perhaps the biggest threat to New Zealand's prosperity and there is no obvious solution.
Thanks to those who have provided advice and help in the past couple of years.
