The_Warehouse_Group

The Warehouse Group

The Warehouse, founded by Stephen Tindall in 1982, is the largest department store retailer operating in New Zealand. The Warehouse is largely a discount store similar to Wal-Mart in the United States, however The Warehouse sells far more generic brand merchandise than other discount or department stores. The company also formerly had operations in Australia, which were sold to Australian Discount Retail. For the fiscal year ending October, 2005, The Warehouse reported net income of NZ $71.9 million on NZ $2.224 billion of sales revenue (3.6% profit margin).

As of 2005, the company had 253 stores throughout New Zealand and Australia along with more than 6 distribution centres in total. On November 24, 2005, The Warehouse announced that was selling its Australian operation for AUS$98 million ($99 million NZD).

Colloquial names for the company's stores include "The Red Shed", "WareWhare" (pronounced Wah-ree-fah-ree, whare is Maori word for house) and "Wuddy Fuddy".

Milestones

1982: First store opens in Takapuna, Auckland.
1990: First nationally distributed advertising "mailer'.
1991: Sales exceed $100 million.
1991: First Warehouse Stationery store is opened.
1992: Launch of The Warehouse card.
1995: The Warehouse added to the New Zealand Stock Exchange, under the symbol TWH.
1996: Opening of North Island Distribution centre.
1996: The largest Warehouse store at the time in Invercargill opens and local businesses suffer creating a large amount of empty shops in the city.
1998: Introduction of apparel as major department.
2000: The Warehouse is added to the NZSE 10 index.
2000: Sales exceed $1 billion.
2002: The Warehouse celebrates 20 years in operation.
2003: The Warehouse Australia brand is launched, with a total of 126 stores.
2004: The Warehouse signifies overall brand change and store format change
2005: Lab store launched in the Hamilton suburb of Te Rapa.
2005: Warehouse brand relaunched with new lower-case logo and TV ads softened.
2005: The Warehouse signifies it's intention to enter the liquor market.
2005: The Warehouse announces it will pull out of its Australian operation by Christmas.
2005: The Warehouse Australia sold for A$92 million (NZ$99m).
2006: The Warehouse begins selling alcoholic beverages in selected stores. Invercargill and Gore stores are excluded from selling alcohol due to local licencing laws.
2006: The Warehouse launches the first of its new format stores branded 'The Warehouse Extra' at Sylvia Park, Auckland. The offer includes full grocery as well as a pharmacy, bakery and Photo Processing.
2007: The Warehouse celebrate their 25th birthday and to mark the occasion release 13,000 balloons, causing concerns from environmentalists.

Business

The Warehouse operates discount retail department stores selling a broad range of non-grocery and grocery products. As of January 2005, The Warehouse employed 7,531 people in New Zealand. The Warehouse's corporate headquarters are located in North Shore, New Zealand.

Apart from retail locations, it operates 2 distribution centres located in Wiri, New Zealand and in Christchurch, New Zealand.

In addition to its own operations, it also owns various brand names that are located within the stores. It has gardening facilities located in Auckland, Hamilton and in Christchurch. Along with its gardening brand Just, it also operates nearly 30 "in-company" brands.

The Warehouse is publicly traded on the New Zealand Stock Exchange under symbol TWH.

Stephen Tindall announced in September 2006 that he planned to buy out other shareholders and take the company private, though this intention has been subsequently withdrawn following significant interest from competitors Woolworths Australia (who own Progressive Enterprises in New Zealand, New Zealand's second-largest supermarket chain) and Foodstuffs Co-operative. Both of these major competitors have recently acquired approximately 10% of the Warehouse's ordinary shares each and both have applications currently before the New Zealand Commerce Commission for clearance to potentially acquire up to 100% of The Warehouse Group.

Competition

The Warehouse's chief competitors in the national retail scene include Supercheap Auto (automotive products), Farmers (upscale department stores), Kmart (discount department stores) and the Briscoes Group (sports and homeware store chains). Ironically, The Warehouse is now competing in the non-discount market.

With the launch of 'The Warehouse Extra' at Sylvia Park, The Warehouse expanded into the grocery business (see 'Hypermarkets' section below), though it is unclear whether this enterprise will eventually be extended to a substantial number of other stores.

Criticism

The Warehouse has always been heavily criticised for poor products despite offering these products at exceptionally low prices. In the early nineties, The Warehouse generally stocked low quality, easily breakable products. However, in recent times, the company has put pressure onto suppliers to increase the quality of their products. Despite this The Warehouse has been known to have product recalls of items they exclusively sell. A recent example is a brand of cycle helmets sold at The Warehouse that had the insulation detach from the shell of the helmet. As a result all Helmets were recalled and customers who purchased these helmets asked to return for a refund.

The company operates a comprehensive returns policy. A "money back guarantee" policy (returns accepted for any reason) is available on most products, excluding underwear, pre-recorded media and perishable products. Some industry observers believe this is why The Warehouse has been so popular in New Zealand. This concept has not worked in Australia, particularly due to the fact that there are many other more well-established department store chains (K-Mart, Target, Big W). Australian stores no longer advertise a "money back guarantee." In late 2005, The Warehouse Group announced its decision to close its Australian arm.

The Warehouse has always been a popular target for shoplifters; however, since the mid-nineties, security has been increased, including the introduction of security guards, surveillance cameras and plain-clothes security professionals.

The Warehouse has also been known to cause the closure of other local businesses in any area in which a new Warehouse store is opened. It was once stated that for every job The Warehouse creates, another nine are taken from other businesses. The most notable closures of businesses include the Deka Department stores and some Para Rubber stores in some cities. More recently The Warehouse was blamed for the closure of Sounds Music stores as well as illegal downloading of music. The management of The Warehouse dispute these claims.

In May 2007 to mark the 25th Birthday of The Warehouse the company released 13,000 balloons from Dairy Flat. This sparked concerns from the Department of Conservation and other environmentalists as the balloons have been known to endanger wildlife.

In December 2007 a Whangarei Women lost her job at The Warehouse after leaving the comment on her Bebo page saying "work sux" and that having to work to midnight was "gay like the mangagement.

Australian Operation

In 2000, the company entered the Australian retail market. It acquired the Clint's Crazy Bargains and Silly Solly's retail chains. At the time of purchase, those chains had around 117 stores.

In 2003 the company built a $33 million (AUD) distribution centre in Queensland, to service the country. Later that year, the company introduced its Tui and Tolas inventory management systems from New Zealand.

As of 2005, the Australian arm was still under-performing. Sales for 2005 were at $518.8 million (AUD), compared with $567.3 million (AUD) in 2004. The Warehouse Group Limited announced in November, 2005 that it had entered into a conditional agreement to sell The Warehouse Australia business to Catalyst Investment Managers and its parent PPM Capital Limited (together, Catalyst) and Castle Harlan Australian Mezzanine Partners, acting on behalf of the CHAMP I and CHAMP II funds (CHAMP) for A$92 million (NZ$99m). The new entity was known as Australian Discount Retail (ADR). As part of the transaction, The Warehouse Australia's Sydney Head Office would be sold to Investec Wentworth Specialised Property Trust. While the effective date for the transaction was to be 27 November 2005, completion of the sale was expected in early 2006 and was subject to normal regulatory approvals.

At its formation ADR also purchased the discount store operations of Miller's Retail, including the Go-Lo, Crazy Clark's and Chickenfeed (Tasmania) chains. There were 335 such stores at the time of sale.

According to The Warehouse Australia's website, Australian Warehouse stores will soon be renamed Sam's Warehouse.

Hypermarkets

In June 2006, "The Warehouse Extra" opened at Sylvia Park, Auckland. It was the first of a planned chain of hypermarkets, at 135,000 sq ft (12,500 sq m). In a similar fashion to the Wal-Mart Supercenters of the United States, the foodmarket department aisles are placed at a perpendicular angle to the general merchandise. It is the first store to feature an in-store bakery, pharmacy and cafe, and instead of the usual tall industrial shelving, a more conventional store shelving system has been used. The store also features a lot less red than in traditional stores, but the familiar concrete floor still exists. The next branch of "The Warehouse Extra" was in Whangarei. In October 2008 The Warehouse announced that they will be canning "The Warehouse Extra" format with stores reverting to the more traditional style of store coming months.

Financial results

The Warehouse went public in 1995. Since then the stock has climbed from $1.29 to $5.54 in 2005. During 2005, the stock dropped dramatically due to worse than expected results from the Australian operation.

However, the company has not been without success. It is New Zealand's largest retailer and one of the largest companies in New Zealand in terms of annual revenue. It is well ahead of its nearest compeititors Briscoes and Farmers in terms of sales. Various different explanations have been offered for this:

The Warehouse has always had an approach of "cheap prices everyday, all the time". Or its actual slogan "where everyone gets a bargain".
The Warehouse benefits from economies of scale in manufacturing and logistics; the purchase of massive quantities from its suppliers combined with a very efficient stock control system help make The Warehouse's operating costs lower than that of its competitors.
One particular aspect of the economy of scale is the aggregation effect, used in other businesses such as Bin Inn and Countdown, whereby The Warehouse sells as many different items as possible. This allows the company to grow revenue over its fixed cost base (more sales out of the same store). This is why The Warehouse began to sell low margin groceries.

Statistics

Retail operations

The Warehouse operates 2 major formats under 3 different divisions:

The Warehouse New Zealand (Red Sheds)

Average 80,000 square feet (7,400 square metres) and include a selection of general merchandise, including apparel, electronics, health and beauty aids, toys, sporting goods and household products. Also includes large gardening departments, along with music, entertainment and in-store photo processing.

The Warehouse Australia (Yellow Sheds)
Average 80,000 square feet (7,400 square metres) and include a selection of general merchandise, including apparel, electronics, health and beauty aids, toys, sporting goods and household products to a bare minimal
Warehouse Stationery (Blue Sheds)
Average 30-40,000 square feet (2800-3700 square metres) and include a large selection of stationery, computers, printers and all computer/office products.

Store counts & revenue

Company Total: 253 (including Australian stores) (NZ$2.225 billion)

The Warehouse NZ stores: 85
The Warehouse Australian stores: 126
Warehouse Stationery stores: 44

Key employees

Executive Board
Ian Morrice	Group Chief Executive Officer
Stephen Tindall	Founder
Directors
John Avery	Director
Robert Challinor	Director
John Dahlsen	Director
Graham Evans	Director