WHS - Warehouse Group

[Basil]

Basil sold his shares to Nick not that long ago - Nick paid $4.11 for them

They say insider buying is a good sign. Even the CFO was buying about the same time

Suppose Nick not worried that those shares are now $2.60 - used to saying everybody gets a bargain

Moral of the story is don't blindly follow insiders, they're often buried so deep inside the company they can't see the wood for the trees.  Better to use insider buying as confirmation with supporting fundamental and technical analysis and if FA and TA don't support the insider buying, ignore it.

The big question on my mind now with these, (that BTW have never left my watchlist), is what are they worth now and what level of dividend is sustainable?
As a corollary to that question, if I can work out the answer and I'm not sure I can at this point, is there any benefit to me owning some of these again assuming they did reach what my gut tells me (a little under $2) is a pretty good reentry point, in terms of some diversification from HLG or should I just get even more HLG instead?

I guess the nub of the issue is its clear to me now that WHS is a no growth company and that's never ever going to change.  K Mart and Costco's expansion are going to keep nibbling away at market share and the previous darling of the group (Noel Leeming) appears to be set for quite a protracted period of slower sales as most people are well and truly done with nesting expenditure and that Freezer / TV / whatever, they bought for the lockdown isn't going to need replacing for many years.  In terms of the retail sector, I think WHS is going to be an underperformer in 2023 and it's really hard to see what's going to break WHS out of its current downtrend so I think I will stay away for the foreseeable future.

Just a real quick estimate.  If they can do $80m this year and I am not sure they can so maybe best to go with $75m, based on the latter figure that's only 21.6 cps.  With the 10 year risk free rate at 4.5% now we can't use a no growth PE of 8.5 anymore we have to use 8 under Ben Graham's formula so 8 x 21.6 cps = indicative value $1.73. 70% of 21.6 cps = ~15 cps in annual dividends fully imputed = 20.83 cps gross so my really quick and early estimate for gross yield this year at $2.60 is 20.83 / 260 = 8%.  Yes it meets my 8% criteria, but I think the chances of the share price deteriorating considerably from $2.60 in 2023 are very high.

[winner (n)]

Cashflow in F23 could be a bit sad

They've already said $135m of capex planned .......hmmm

[Basil]

That's a LOT of money to just "stay in business" eh!  Thanks for that reminder, they'll just add most of that and the dividends they pay to their growing debt level's.  Next year's balance sheet is going to be a far cry from the days of $160m cash on hand eh.  Its all no worries though because by then they might have 950,000 active users of the market.com so all that extra capex is fully justified 😉
~ $25m a year spent on Nick's N.Z. version Amazon fantasy...why bother with WHS when the CEO is so busy shooting shareholders in the foot every year!
I think you've just helped me answer the second part of my question in paragraph 2 above.  Cheers mate. 👍

[winner (n)]

That's a LOT of money to just "stay in business" eh!  Thanks for that reminder, they'll just add most of that and the dividends they pay to their growing debt level's.  Next year's balance sheet is going to be a far cry from the days of $160m cash on hand eh.  Its all no worries though because by then they might have 950,000 active users of the market.com so all that extra capex is fully justified 😉
~ $25m a year spent on Nick's N.Z. version Amazon fantasy...why bother with WHS when the CEO is so busy shooting shareholders in the foot every year!
I think you've just helped me answer the second part of my question in paragraph 2 above.  Cheers mate. 👍

I'd say that dividends will revert to pre-covid leves ........and that a steady 16/17 cents is all punters will get if things go OK

[Basil]

What if things don't go okay ?

[Waltzing]

NL and T7 just finding it hard meters against the oppo?
 

[winner (n)]

So after spending the best part of $100m on restructuring/consultancy/Agile etc etc and investing goodness knows how much in IT the WHS business model metrics are much the same as they were 5 to 10 years ago.

Yes... not much in way of growth, GP% in low 30s resulting in a npat margin not much above 2% ...it's still a high volume low margin business capable of making $60m/$70m a year with little hope of doing better than that

Suppose Nick would say that if wasn't for the ecosystem he's built that adds value to customers WHS might not exist today ...I'd disagree

I would hazard a guess (not a prediction) the story might be different in 5 years time but they will be making $60m/$70m in a good year

Só I suppose one values it on that basis

[Basil]

WHS was 40 years old in N.Z. in November 2022.
It's hard to form any other impression of the brand than its very, very old and very mature.
Probably reached the point of market saturation 2 decades ago when it was at its peak in mid 2002 @ $7.40
Basically, it's been all downhill since then.   

[winner (n)]

Long term share price chart is a decent reflection of how WHS has performed (as a company) this century

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[Clearasmud]

Sold my Whs in early October after an indifferent report.
Under $2 sure a nice no growth dividend stock.
The last 2.5 years I've been comparing WHS to Myer as their sales are quite similar but Myr's market cap has been far lower.
Myr's sp has doubled while Whs has gone no where.
It really comes down to management, as usual and Myr's is good, not sure about WHS.
Double tax on dividends of course makes Myr unattractive for Kiwi taxpayers.
It was possible to buy 0.1% of Myr for between 80k and 160k in 2020!
Plus you would have effectively 50 employees to your account. I don't know if that's good or bad lol.
 Dividends were discontinued for a few years but have restarted 8% net, 5c per share.

[Hectorplains]

I made it into The Warehouse for the first time in ages today - I had to buy some plants for project (and my home sown were too far off flowering.)  Whew, it was an insipid shopping experience.  The garden section was poorly stocked, much more expensive than nearby Bunnings and many of the plants were in a poor condition.  Throughout the store whole aisles were carrying barely any stock.  Especially off was how even stock for the season- like sport and fitness gear, pool toys and fishing items - were practically bare.  The much touted grocery section was a joke.  Unsurprisingly, there were very few people in store, and fewer still who were buying more than a few cheap items.  Stores like Bunnings, Mitre 10 and K-Mart are eating these guys lunch for them. 

[Basil]

Funny you say that I had to go down there this evening for a basic first aid kit that I checked online was available at my local store but the smallish kit I really wanted wasn't actually available in stock at all.  I found the same shambles you refer too.  Ailes with hardly any stock, what there was available was often in a state of disarray.  The women's cosmetics section was a complete mess and almost bare.  Do you think I could find a staff member to help me...NO !  I would be embarrassed / ashamed if I was still a shareholder.    I think it's obvious their software and stocking systems are an absolute shambles.

On the other hand my other most recent retail foray was buying some Glassons vouchers for the ladies in my life.  Local store was immaculately presented, stock presented in a very orderly, neat and tidy manner and the store manager was lovely young lady who was very professional and friendly.  As different as chalk and cheese those two retail experiences.

[Hectorplains]

Funny you say that I had to go down there this evening for a basic first aid kit that I checked online was available at my local store but the smallish kit I really wanted wasn't actually available in stock at all.  I found the same shambles you refer too.  Ailes with hardly any stock, what there was available was often in a state of disarray.  The women's cosmetics section was a complete mess and almost bare.  Do you think I could find a staff member to help me...NO !  I would be embarrassed / ashamed if I was still a shareholder.    I think it's obvious their software and stocking systems are an absolute shambles.

On the other hand my other most recent retail foray was buying some Glassons vouchers for the ladies in my life.  Local store was immaculately presented, stock presented in a very orderly, neat and tidy manner and the store manager was lovely young lady who was very professional and friendly.  As different as chalk and cheese those two retail experiences.

Very brave of you to even enter the twilight zone of the women's cosmetic section

[winner (n)]

Basil your ' I think it's obvious their software and stocking systems are an absolute shambles.' comment made me wonder if local Noel Leeming store ever found the TV we wanted when the sales assistant when looking it up on the records said no problem there's two out the back .......and came back looking worried saying they not there.

Took the display model with a couple hundred off.

About 15 years ago all hell broke loose and WHS share price collapsed when they came out and said they couldn't find tens of million of stock the computer system said they had and had to write it off. That stuffed that years profit (probably was an 'adjustment' lol). Seems things haven't changed even though spent zillions on IT systems

[winner (n)]

Joke from years ago

Going from a Warehouse store to a  Briscoes store is like going from Steptoe and Sons to Harrods