Warehouse shares soar after news of off-load plan

The Warehouse had aimed to break even in Australia by 2007.

Shares in The Warehouse soared yesterday as the market cheered plans to sell the company's loss-making Australian operation.

The share price leaped nearly 10 per cent to close at $3.68 as the discount retailer confirmed it was talking to a rival Australian retailer about the possible joint sale of stores.

The Australian newspaper reported yesterday that The Warehouse and Miller's Retail were planning the joint sale of their Australian chains - for as much as $300 million.

At least four private equity firms had shown some interest in the chains, said the paper.

The Warehouse did not refer directly to a sale process but said it was "reviewing various strategic options".

Things were at a preliminary stage and it was too early to speculate on the outcome.

A source said those options included "business as usual" - the possibility that the Australian business would keep trading as it is.

But brokers are sceptical about the likelihood that The Warehouse could leave the business untouched now that it has begun exploring options.

One broker, who asked not to be named, said public announcements like this one were not liked by either staff or customers. Going public was an indication that The Warehouse was serious about the sale.

It is understood investment bank Credit Suisse First Boston has been employed by The Warehouse to investigate the sale.

ABN Amro head of research James Miller said the positive market reaction to the news was inevitable as staying in Australia meant burning more money.

The company had hoped to break even across the Tasman by 2007.

But even if it had achieved that objective, it did not look like it was ever going to be a great business and would have to struggle along in a second-tier position.

Like The Warehouse, Miller's Retail has struggled to make a profit in Australia.