Ailing red sheds in for big shake-up

The Warehouse will slash stock levels by a third as it seeks to tidy up its stores and shift its focus away from products and back to customers.

The revamp and a raft of other changes new chief executive Ian Morrice will make to breathe life into the flagging "red sheds" seem to have been accepted gracefully by founder Stephen Tindall and his fellow board members.

"We have been through some difficult times. We take full responsibility for what has happened," Tindall told shareholders at The Warehouse's annual meeting in Auckland yesterday.

Seeking re-election, board member Robert Challinor accepted Morrice's criticism but said the directors stood behind many of the decisions they had made, including going into Australia.

Morrice said of his fellow board members, "Where I have been critical, they're prepared to take accountability."

Many of them have accompanied The Warehouse through its toughest times as a listed company.

While the company made a $151 million profit last year, it was barely able to better the previous year's result, despite having lifted sales.

The Australian arm had an operating loss of $36.5 million in the year to August 1. Hovering just under $7 early last year, The Warehouse's share price closed down two cents yesterday to $3.67.

And, at the red sheds, same-store sales fell 2.6 per cent in the quarter ended October 31. That came despite the retail sector growing.

"Who is responsible and what has gone wrong?" asked one shareholder.

But the focus of the meeting was on the future, on getting the Australian "yellow sheds" into the black within two years, increasing foot traffic through the red sheds and selling higher-value goods.

Morrice, who reduced stock levels by 30 per cent at his former workplace, the British B&Q Warehouse chain, would undertake a similar measure here.

"There's a lot of benefits that come from that. You create a better shopping environment," he said.

"The shop floor staff can also focus better on customers."

Stock was already down 10 per cent from the same time last year. The bulk of Morrice's changes will begin to take form next year.

"We will be kicking this off after we get Christmas and New Year behind us."

At the same time, The Warehouse is stocking up with new products. It hopes to make a splash in the electronics market this Christmas with Kodak digital cameras and Dell laptop computers.

There are also more fundamental changes. Morrice wants to steer away from delivering bargains and little else.

"People's aspirations are changing - they want more than just a good price," he said.

To that end, Tindall produced the decade-old manifesto he put together when The Warehouse listed in 1994. The statement promised to "put the customer first" and make the "desirable affordable".

"I sat down 10 years ago and penned this out," Tindall said. "It's as pertinent today."

Morrice said securing cheap products had become more important.

"We may have lost our focus on some of these things, in particular the customer focus."