KEY POINTS:
The Warehouse Group is planning a blitz of new smaller format stores as it looks to take advantage of depressed land and building prices, and a strong track record in difficult economic times.
Now free from the distractions of the abandoned Extra grocery retailing format, New Zealand's largest
listed retailer is embarking on a plan to grow its store numbers from 85 to more than 100 in a space of five years.
Managing director Ian Morrice told shareholders at its annual meeting in Auckland yesterday that it had identified 30 regional catchments that were without a Red Shed.
At 2000sqm, the new stores would be much smaller than a typical 5000sqm Red Shed outlet.
Morrice said work on the first two of these new stores, located in the South Island, were already underway.
He told the Weekend Herald after the meeting that the smaller format was not new to the retailer, with smaller stores in locations like Johnsonville and Papakura.
"Some of them are rural market towns, which have big enough catchments and populations, but also in metro locations where we can't get enough of a big selling space - we're now prepared to innovate and look at smaller format stores whether that be across different parts of Auckland or in Wellington."
Bigger stores could also be on the horizon - such as in Silverdale, north of Auckland - where the retailer has a land bank. Larger replacement stores were also a possibility, said Morrice, as growth outstrips some of their older urban outlets.
Founder Stephen Tindall, who started The Warehouse in 1982, said the company's history showed it performed well in tougher times.
"The fact is that we pulled out of Extra because it wasn't giving us the halo effect, and we feel that this is a very good time to go and secure some more space while the prices are right for land and buildings.
"While it won't be easy - we've difficult times ahead - we think that this is the right time for us to expand with space."
Shareholders were treated to an upbeat address from Morrice, who said along with the new stores, the company was investing heavily in online retailing.
"This is a time when a brand like The Warehouse should prosper."
A move to improve product quality has improved sales, with year-on-year apparel sales up 5.8 per cent, and grocery, pharmacy and health & beauty categories up 9.1 per cent.
Morrice said the Design for Everyone strategy of bringing more upmarket, stylised offerings to the stores was paying off.
The Rachel range of womenswear designed by supermodel Rachel Hunter had sold "incredibly well", he said.
Overall, womenswear sales were up 10 per cent in the the week following the range's launch in September.
Morrice had no regrets about Extra. Grocery was the biggest retail category in New Zealand, and the group simply had to venture into it, he said.
Chairman Keith Smith expects consumer spending and trading conditions to remain subdued for some time.
"The first quarter has seen difficult trading conditions but sales were on plan for the quarter with margins being held at levels similar to last year."
While the first quarter was "solid", full year results were heavily dependent on sales during December and early January.
NO NEW OWNER IN NEAR FUTURE
New Zealand's largest listed retailer is unlikely to have a new owner in the near future. Warehouse founder Stephen Tindall, who controls 53 per cent of the company, has cast doubt on a change in ownership any time soon, given depressed market conditions. He told the Weekend Herald after the company's annual meeting yesterday that he was in no hurry to sell his stake in the company he started in 1982.
"I'm perfectly relaxed. I've got no debt on my shares so there's nothing pushing me to have to do it. I think it's probably fair to say that people don't normally sell in the trough of a cycle unless an exceptional price comes along. And that's probably unlikely at the moment. My view is we'll see what happens ..."
Tindall would not be drawn on what his asking price was, but market speculation has pegged the magic mark at around $8 per share. Warehouse shares closed yesterday at $3.63, up 11c. He also dampened speculation of a revival of his bid to privatise the company.
The 2006 bid had the financial backing of private equity players Pacific Equity Partners, but was trumped within weeks by Woolworth's acquisition of a 10 per cent stake. Asked if he was in talks with any party about taking back the company, Tindall said: "I'm not at the moment."
The prospect of a takeover from either Foodstuffs or Woolworths was the only question to emerge from shareholders at the meeting yesterday. Asked if there had been any communication from either supermarket operator since the Extra format was dropped, Warehouse chairman Keith Smith was categorical, repeating the phrase, "none at all".