WOW To Miss WHS?

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Will Woolworths be a disappointed retailer in New Zealand just as it is positioning itself for an assault on The Warehouse Group?

Could be, and what would be galling is that the company is going to considerable lengths to portray itself as warm, cuddly and an ANZAC just as the Kiwis look to a home town solution to fight off the invader from across the ditch.

Reports in New Zealand papers at the weekend suggested that the founder of The Warehouse, Stephen Trindall is planning to do a deal with Woolies rival, Foodstuffs and private equity group, Pacific Equity Partners.

PEP was the group Trindall had linked with in his now abandoned attempt to take The Warehouse private last year: a move which was blocked by raids by Foodstuffs and then Woolies which netted both retailers 10 per cent each of WHS’s equity.

Foodstuffs has already filed for clearance with the NZ competition regulator and last week Woolies joined the queue with its newish CEO, Michael Luscombe in the country for talks with Mr Trindall and to press the flesh.

That’s where he spoke to the media and invoked the spirit of Anzac and made several other odd comments in an attempt to paint his company as warm, cuddly and a Kiwi in all but origin and management.

According to the media reports Mr Trindall, PEP and Foodstuffs are looking at linking up to frustrate Woolies: Trindall would have a major but not majority holding and PEP and Foodstuffs would hold the remainder. Foodstuffs is a co-operative and would find it difficult to bid for WHS on its own.

Woolies wants The Warehouse to give itself market leading position and expand into general merchandise (along the lines of Big W in Australia).

Foodstuffs and Woolies need Mr Trindall’s allegiance as he owns 48 per cent of the company through his personal holding of 27 per cent and the 21 per cent owned by a charity.

Woolies doesn’t have a great track record in buying companies and then working with founders. It wants control straight away.

The Warehouse Group, with has 128 discount department and stationery stores, is the biggest general merchandise and apparel retailer in New Zealand and has annual sales of about $1.7 billion.

Its tentative move into food retailing threatens both Woolies and Foodstuffs comfortable control of the supermarkets business in NZ.

Of the two, Woolies/Progressive is more exposed.

Woolies says Foodstuffs has a stronger market position and buys more product in New Zealand that it does.

That’s an attempt by Woolies to portray itself as the ‘battler’ in any argument with Foodstuffs and how it’s starting from a much weaker position.

Australian investors took a positive view of the news on WHS in the median: Woolies shares jumped sharply yesterday, rising 36c at one stage to over $23 a share.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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