Five Year Financial Analysis and Projection
The Warehouse Group
Five Year Financial Analysis and Projection
2013 Business Report
Executive Summary
In the last two years The Warehouse Group (WHS) has looked to halt a decline in profits and revenue. The iconic brand fondly referred to as the Red Sheds by New Zealanders had hit rocky ground with a list of failed ventures (including Warehouse Australia), a plummeting share price $8.50 in 2000 falling to $2.50 2012 (partly due to the global financial crisis), falling operating profit and stagnant revenue growth. Some local distributors were reluctant to supply the store for fear of brand damage and their supply chains lacked the diversity to provide on-going profit margins. In 2008 WHS was the target of potential takeovers from Woolworths and Foodstuffs but the commerce commission prevented previous moves due to competition rules relating to the sale of groceries in The Warehouse Extra stores. Investors have even received unsolicited offers from private investors.
Based on the previous two years results the decline has successfully been halted. Plans to bring WHS stores into the 21st century with a $430 million capital spending plan that refits tired stores and rebuilds brand image are underway. Higher end goods have been sourced through a combination of parallel importing and company acquisitions. Share price has begun its recovery reaching a five year high of $4.39 in May 2013. Dividend pay-outs have been increased to 90% of adjusted net profit providing good return to investors.
WHS is still a potential target for takeover, Woolworths and Foodstuffs both still own 10% each and groceries have now been removed from stores which may open the door again. This potential makes medium term investment in WHS shares quite attractive as any such bid would likely be an improvement on current share price.
In summary, WHS shares provide an attractive medium to long term investment, a solid performing business moving in the right direction providing
Five Year Financial Analysis and Projection
2013 Business Report
Executive Summary
In the last two years The Warehouse Group (WHS) has looked to halt a decline in profits and revenue. The iconic brand fondly referred to as the Red Sheds by New Zealanders had hit rocky ground with a list of failed ventures (including Warehouse Australia), a plummeting share price $8.50 in 2000 falling to $2.50 2012 (partly due to the global financial crisis), falling operating profit and stagnant revenue growth. Some local distributors were reluctant to supply the store for fear of brand damage and their supply chains lacked the diversity to provide on-going profit margins. In 2008 WHS was the target of potential takeovers from Woolworths and Foodstuffs but the commerce commission prevented previous moves due to competition rules relating to the sale of groceries in The Warehouse Extra stores. Investors have even received unsolicited offers from private investors.
Based on the previous two years results the decline has successfully been halted. Plans to bring WHS stores into the 21st century with a $430 million capital spending plan that refits tired stores and rebuilds brand image are underway. Higher end goods have been sourced through a combination of parallel importing and company acquisitions. Share price has begun its recovery reaching a five year high of $4.39 in May 2013. Dividend pay-outs have been increased to 90% of adjusted net profit providing good return to investors.
WHS is still a potential target for takeover, Woolworths and Foodstuffs both still own 10% each and groceries have now been removed from stores which may open the door again. This potential makes medium term investment in WHS shares quite attractive as any such bid would likely be an improvement on current share price.
In summary, WHS shares provide an attractive medium to long term investment, a solid performing business moving in the right direction providing
References: Atrill, P. (2011). Accounting : an introduction / [Peter] Atrill ... [et al.]: Auckland : Pearson, 2011 1st NZ ed. Bollard, A. T. (2009). Coping with global financial and economic stresses. Reserve Bank of New Zealand Bulletin, 72(1), 34-45. Claire, R Claire, R. (2013b). Torpedo7 purchase should fire up Aussie options. Press, The, A11. Kida, M Nick, K. (2011). The Warehouse Group defends its spending plan. Press, The, C20. Nick, K The Warehouse to raise $100m. (2010). Nelson Mail, The, 09.