KEY POINTS:
Warehouse Group chief executive Ian Morrice is standing by claims he is refining the Warehouse Extra grocery offering after a High Court judge Jill Mallon pointed to "a real prospect" that Extra will be abandoned.
Morrice had given evidence to the High Court case that overturned a Commerce
Commission ban on grocery giants Woolworths Australia and Foodstuffs buying The Warehouse. The commission found that a sale to either was likely to substantially lessen competition.
The High Court released its full written judgment this week.
Morrice said yesterday that he told the court the same thing he told the market in the results announcement in September, and at the shareholders meeting on Friday.
The Warehouse strategy is built around the halo effect where grocery customers increase foot traffic and sales of general goods.
"We have said that achieving the halo effect is a critical success factor, and that it is too early to assess this, Morrice said yesterday. "The normal review process is being conducted."
Last Friday he told shareholders that conversion to the Extra format in Whangarei had boosted sales by 30 per cent, which was "an encouraging start" but still below expectations.
The company determined it would have to wait until after its second Extra store in Whangarei had completed a full year. He said that while sales were up as expected, costs for the new format were higher than expected.
Meanwhile, both Woolworths and Foodstuffs are adjusting to the new battle plan.
Any bid will be delayed until the commission has decided whether to seek leave to appeal.
Sharemarket analysts have long been scornful of the commission's approach. One sharemarket analyst who asked not to be named described the High Court determination as "a slam dunk".
Tony Dellow, a partner at Buddle Findlay in Wellington agreed the focus on facts rather than points of law limited prospects for an appeal.
The High Court had referred to errors-in-fact which cited overseas examples such as Walmart in the United States, which were not comparable.
Within a week of the High Court releasing its headline decision rejecting the appeal, the share price had risen from $4.99 to close yesterday at $6.50 per share.
Macquarie Equities New Zealand investment director Arthur Lim said the market was adjusting to the new status of the stock.
"It indicates the market now believes that Tindall is a seller and not a buyer," Lim said.
Warehouse founder Stephen Tindall controls about 53 per cent of the company, making him kingmaker in any takeover.
Simon Botherway of Brook Asset Management said the Warehouse was worth more to Foodstuffs or Woolworths than it was to Tindall. It is understood the Australian grocery giant approached the Warehouse Group board of directors yesterday.
