WHS - Warehouse Group

[Basil]

Two hours apparently.  This from Businessdesk raised my eyebrow:

The Warehouse also expects TheMarket loss to be less than $5m in the 2024 financial year – which Grayston said was down from $16m in the first half of the 2023 financial year.  He told BusinessDesk after the meeting that TheMarket wouldn't be getting the Torpedo 7 treatment even if its loss was wider than expected as TheMarket was a "very different scenario". Nor is The Warehouse interested in buying online grocer Supie, which recently went bust.  "We've seen it's a business model that hasn't succeeded," he said.

Nick can't see the glaring contradictions in what he's saying?  I doubt the numbers he's putting forward too.  Temu is absolutely blitzing TheMarket, and it only launched here 8 months ago.  That's before you even consider Wish, AliExpress, Shein et al. 

But he's paid $3m+ to have special insights.  AI would do a far better job.   You can't turn the ship around if there's no effective rudder.  Enough said.

[Basil]

Just confirmed how hopeless Joan and Nick are.

Didn't watch much of theirvp speeches but heck they made of meal of answering questions

Questions were mainly about piss poor customer experiences and standard answer we'll take that on board.

Hell bent on this Market Club thing (not The Market) and poor Nick didn't understand that not every one has a smart phone to down load the app ......and not only oldies

And The Market staying ...when asked when they giving up on it Nick said it's coming right

Desperation crept in at times ....future looks bleak I reckon

Agree 100%.  On a forward PE of 14 and no credible plan to rebuild.   Losses at torpedo 7 are going to be heinous this year. Hmmmm...could this be the next one to exit the NZX50 sometime in 2024 ?

[lorraina]

Just confirmed how hopeless Joan and Nick are.

Didn't watch much of theirvp speeches but heck they made of meal of answering questions

Questions were mainly about piss poor customer experiences and standard answer we'll take that on board.

Hell bent on this Market Club thing (not The Market) and poor Nick didn't understand that not every one has a smart phone to down load the app ......and not only oldies

And The Market staying ...when asked when they giving up on it Nick said it's coming right

Desperation crept in at times ....future looks bleak I reckon

I have found myself a member of the market.
However I do not use a cell phone.
My Nescafe is $8 per 180 gm jar,but $7 using the market code on a cell phone.
I have cards for New World and Countdown,however no The Market cards available.
Therefore another disappointed customer.
What's the saying in retail; Give the customer what they want, and you will get what you want.
WHS will not be getting much of what they want from me.

[lorraina]

I have found myself a member of the market.
However I do not use a cell phone.
My Nescafe is $8 per 180 gm jar,but $7 using the market code on a cell phone.
I have cards for New World and Countdown,however no The Market cards available.
Therefore another disappointed customer.
What's the saying in retail; Give the customer what they want, and you will get what you want.
WHS will not be getting much of what they want from me.
Back to Pak'n Save.No cards,but great prices.I get what I want there too.

[Basil]

I've also started going to Pak n Save after getting sick of my local New World fleecing me like a sheep with their outrageous prices.  The price difference is remarkable.  Gosh, Pak and Save are so incredibly busy.  So many people can't all be wrong and as you say, you get what you want there at fair prices without all the mumbo jumbo of being a member and dicking around with so called loyalty cards that are supposed to reward you, but in New World's case simply reward the local store owner.  I can't be bothered shopping for groceries at WHS anymore, its simply not worth my time going out of my way for the very limited range they have and then having to go elsewhere for the bulk of the shop.

[Hectorplains]

I've also started going to Pak n Save after getting sick of my local New World fleecing me like a sheep with their outrageous prices.  The price difference is remarkable.  Gosh, Pak and Save are so incredibly busy.  So many people can't all be wrong and as you say, you get what you want there at fair prices without all the mumbo jumbo of being a member and dicking around with so called loyalty cards that are supposed to reward you, but in New World's case simply reward the local store owner.  I can't be bothered shopping for groceries at WHS anymore, its simply not worth my time going out of my way for the very limited range they have and then having to go elsewhere for the bulk of the shop.

You should try living rurally and the joy of Four Square pricing.  They offer so much more than mere fleecing, more like a full hung and gutting.

Multiple shop runs reminds me of my Mum, back in the day, clipping 'specials' supermarket coupons from the newspaper.  She'd then spend the best part of a day traversing each one to get the cheapest grocery shop. She refused to listen to any logic around her time being money. 

I thought the dynamic duos plans for Torp7 were weak; "reducing excess inventory and closing poor-performing stores."  It's a start I suppose but it poses a whole lot more questions too like:
How much of this "excess" stock are they carrying? (Obviously plenty if it's an issue)
Why have they not controlled stock levels?
What is their leasing situation and how quickly can they wriggle out of locations that aren't working?
What benefit is there in Torp7 operating as an independent business to the Warehouse?

 

[Basil]

Very good questions HP.  Someone on the other channel I know is in the industry reckons they went on an orgy of new TP7 lease signings with the Covid spending splurge, (if you didn't buy a bike to deal with the covid prison sentences you're unlikely to now), on the expectation that new level of spend, money printing and all, was the new normal.  It would seem Nick has very limited insights despite claiming otherwise.

As you suggest, it really does beg the question of why have separate stores for TP7?  I can see the day they start a whole new program of store within a store for TP7 gear and then try and claim they're marvelous operators driving new efficiencies in their omni channel operations    

We have a "super value" just up the road from us...a misleading name if ever there was one!   Get a really big chest freezer and make a trip once a month to a proper supermarket.  That'[s what we do and then treat the New World as a place for milk, bread and other regular perishable staples.

[Hectorplains]

LOL - we operate two huge freezers and two fridges.  Within the thriving metropolis of opportunity and culture that is Gisborne is the nearest supermarket and that's a 5 hour round trip.  And I count every minute until we leave...

Nick says there are more details of the great Torpedo turn around (some say that's what sunk Scorpion but I digress...)  to come later.  Surely, if it were not for his blinding "ecosystem" vision they'd have put this pup up for rehoming?   

My frustration with shopping at Torp7, is that they're stocking some premium brands but across such a range of categories that they don't have the sales staff with the necessary knowledge to have the level of conversation that those customers bring to store.  Yet their prices are no better than specialist category shops.  If I was buying a high end bike I'd go to somewhere like Scotty Browns where the technical expertise and advise is part of the package.  They will answer all my questions and be able to recommend specific items based on my requirements.  They'll also make me a decent coffee and the whole thing is an enjoyable experience. 

Similarly; their other lower end, beginners level stock is priced higher than everywhere elsewhere.  So nobody thinks, my kid needs a bike lets go to Torp7.

Torp7 made some sense a decade ago as an online store that undercut the specialist physical ones. 

I think Nick is blinded by his own vision.

[Basil]

I think being a WHS shareholder is analogous to being on board a decrepit old rudderless ship on a journey to nowhere with high explosive torpedo's onboard that could go off at any time.  Very happy to leave that experience to others.

[Fiordland Moose]

Regarding TP7 I was talking to Jimbo the other week and we derived an action plan if we were in charge of the WHS. From most preferred to least preferred.

1) Hari Kari.

2) Should no appropriate blade be available, flog it off for f'all to an Australian turnaround specialist like Anchorage or Allegro, or trade player (the later who are unlikely to be interested)

should that fail

(for context - Will have a mixture of BARELY acceptable, moderately loss making, and massively loss making stores)
* Fire nick, replace much of the Board (it happened on their watch)
* Run down the leases on the marginal stores and try hard to exit w/ penalty the big f ups
* Expand into grocery on the leases where they cant get out of
* Keep it as an online store, keep any profitable stores (?), liquidate the rest
* Blame the last CEO
* Continue the WHS' proud track record of keeping these costs as one off restructuring costs below the line.

That's just re TP7.

[winner (n)]

Nick prob hassling his teams to use AI to get sales moving

My mate Tom sums it up in his latest cartoon

Gartner renowned for their insights  had Generative AI in its most recent Hype Cycle as being on the "Peak of Inflated Expectations."

In Gartner's Hype Cycle model, the "Peak of Inflated Expectations" is followed by the "Trough of Disillusionment."

But Nick will persevere with AI

You cannot view this attachment.

[Hectorplains]

Nick prob hassling his teams to use AI to get sales moving

My mate Tom sums it up in his latest cartoon

Gartner renowned for their insights  had Generative AI in its most recent Hype Cycle as being on the "Peak of Inflated Expectations."

In Gartner's Hype Cycle model, the "Peak of Inflated Expectations" is followed by the "Trough of Disillusionment."

But Nick will persevere with AI

You cannot view this attachment.

Oh, I thought it was cheap eggs.  Cheap eggs, A1...Potato, potahto...

[Sideshow Bob]

Meanwhile, T7 still have delays in getting orders out. 7 days for small, up to 25 days for large products. https://www.torpedo7.co.nz/

Omnishambles.....

[thatguy]

I have an outlandish theory id like to share before whs comes clean on how bad the last quarter has been.

There are a couple of reddit threads outlining just how bad things have gotten internally. I also think T7 is about to catastrophically implode.

https://nz.trustpilot.com/review/torpedo7.co.nz.
https://www.thepost.co.nz/business/350126410/warehouse-groups-problem-child-torpedo7
https://www.reddit.com/r/newzealand/comments/1agsbfw/wtf_torpedo_7/?share_id=nTP14tyJu7SPoQFm8ZEJA&utm_content=1&utm_medium=android_app&utm_name=androidcss&utm_source=share&utm_term=1

Also look through the facebook group "NZ Fun Adventures Camping" . most of their tents are being refunded from this summer

Looking through the July accounts I think WHS is on a knifes edge. $400m of equity which is essentially the following in terms of net assets

$100m Clear inventory (inventories - trade creditors)
$220m Fixed assets ($60m of buildings, $160m of fitouts, software etc)
$90m deferred taxation

Now, I believe T7 based on anecdotal evidence could have lost $25m in the last 6 months, and based on their 1st quarter update I wouldn't be surprised to see total WHS down 10% turnover h1. WHich could mean a total loss for the group of approx $50m for the first 6 months.

If I'm remotely close that means the warehouse group is dangerously close to being insolvent. I also believe they will be in breach of a bunch of covenants (they had $76m of borrowings, presumably secured against their buildings).

Why did they sell their royal oak property in July 2023 for a measly $400k profit? they would have tied themselves up in a leaseback scenario that would gobble up that $400k pretty quickly. Is that the actions of a stable company?

They havent released a trading update for the first time in 5 years.....
 
I think they are desperately scrambling in the background lining up

1) PR
2) Banking issues
3) Exit plan for T7
4) Cap raise

All you need to do is look at briscoes group and see that they have $300m of equity, with 3x as much profitability of a turnover base 25% as much as WHS.

Convince me i'm wrong!

If im missing something im all ears.







 

[Fiordland Moose]

aye trouble in paradise eh thatguy

re group trading updates - they did one in early january for 2021-2023, but those were extraordinary periods with covid. their interim isn't until the end of january so pre covid they often didn't provide any q2 info until mid march as part of their half year. They didn't release one in 2020 until end of february. but given the pressure they have been under and TP7's woes I think it would be appropriate from a continuous disclosure perspective to provide an update. I suspect one will come before march, once the board has all its ducks in a row if trading continues to be an issue.

TP7 suffering as it changes its ERP system. I believe they are transitioning to the group Agile system? If so, that could be extremely problematic if they try to exit it as system separation will be immensely complex and time consuming - could take 6-12months in which case it could continue consume cash. They'd probably strike up a shared services arrangement with a prospective buyer (if they exist!) for 12-24 months but wouldn't be ideal from anyone's perspective.

I saw that Anchorage Capital - the Australian 'turnaround' specialist of Dick Smith fame - has set up a number of special purpose bid vehicles here in NZ. Probably looking at something in media, but wouldn't rule them out as wanting to takeover tp7 for free.

I haven't updated my WHS spreadsheets in quite a while so not as familiar with its recent trading as you.

But from a debt perspective I would have thought the banking syndicate will be laser focused on last twelve month trading EBITDA (pre ifrs 16) to net debt and its debt service coverage ratio (DSCR), as well as prospective forecasts.