It can now focus on its core business, which includes the Red Shed discount stores, the Stationery and the Noel Leeming brands, and work on improving performance and value to shareholders.
A part of that involves expanding The Warehouse grocery offering, which has obvious promise even though the company says it has no plans to become a viable competitor to the supermarket duopoly dominated by Woolworths and Foodstuffs.
The proof of The Warehouse’s reprioritisation efforts will be determined in the future, although some shareholders may feel they have seen this movie too many times before.
The Warehouse has been forced to backtrack previously with its ill-fated acquisitions in Australia and it seems to be forever restructuring since founder Stephen Tindall left the business some years ago.
Torpedo7 has been one factor in The Warehouse’s poor performance in recent times, not helped by Covid, high inflation and the economic downturn.
The company raised problems with Torpedo7 last September after a wet summer and late ski season impacted sales of its adventure goods.
It sold $162.2m worth of camping, bike and snow gear in the year to July, down 5 per cent on the previous year. Margins were squeezed by 13.7 per cent.
Increased costs meant it made an operating loss of $22.2m last financial year, as the company took a $4.6m impairment on excess and ageing stock it was selling at a discount.
A major factor was the “significant dislocation of the bike market”, which was Torpedo7′s largest category, the company warned in its annual report, adding that it believed the outdoor and sporting goods sector would remain challenging for the next two financial years.
Torpedo7 sales subsequently slid 25 per cent in the three months to October, compared with the same quarter the year before.
It’s worth noting that less than a year before The Warehouse made its initial $33m investment, an Australian listed firm baulked and sold out of Torpedo7 just two months after taking a 15 per cent stake.
Torpedo7, or something else?
So then, what to make of the new owner, named today as investment firm Tahua Partners?
Tahua has an existing portfolio of brands that include Burger King, Starbucks, Hannahs, Hush Puppies and Number One Shoes.
Its executive shareholders include former supermarket owners Paul and Liz Blackwell (ex-Pak’nSave Albany) and Rob Redwood (ex-Pak’nSave Glen Innes). They were both top of the pack at Foodstuffs, operating two of the country’s largest big-box grocery stores.
Tahua is chaired by former chief executive of Burger King New Zealand John Elliott and other associates include Starbucks NZ CEO Charles Belcher and director Roger Harper.
“As a 100 per cent Kiwi-owned and -operated business with a passion for retail and hospitality, we believe Torpedo7 complements our family of well-loved global and local brands,” a Tahua spokesperson said.
Torpedo7 has a nationwide network of 24 physical stores.
That’s a decent-sized footprint which includes some reasonably sized stores in good locations.
One imagines the existing business could be turned around with the right people having the right amount of time to focus on making the necessary improvements.
One could also imagine a completely different business model, one that uses that store footprint to establish a chain of grocery stores – something two of the Tahua shareholders certainly know a thing or two about.
Of course, that is just a theory and until we hear from the new owners themselves the assumption is business as usual for Torpedo7.
But one thing is for sure. Food retailing is a lot more profitable than selling bikes and kayaks.
Duncan Bridgeman is managing editor of NZME Business, including the Business Herald and BusinessDesk.
