Warehouse news prompts talk of Tindall's next move

Stephen Tindall controls 53 percent of the Warehouse. Photo / Martin Sykes

The pending resignation of Warehouse chief executive Ian Morrice has sparked talk of majority owner Stephen Tindall renewing plans to privatise or sell the business again.

In 2006 Foodstuffs and Woolworths Australia entered takeover discussions with the Warehouse, with each company buying 10 per cent of the business.

The move was then blocked by the Commerce Commission over concerns it would reduce competition in the supermarket sector because the Warehouse had begun selling food through its Warehouse Xtra format stores.

The Warehouse dropped its foray into supermarkets by canning its Xtra formats in 2008.

Market commentator Arthur Lim said Morrice's indication of plans to resign could signal a shake-up at the company.

"It would be very surprising in light of Ian Morrice moving on that the corporate situation is not being seriously considered.

"The future of the Warehouse relies on Stephen Tindall. Getting another CEO, a very good CEO, is a big ask without the Warehouse and Tindall committing to a radical revamp."

Lim said the Warehouse had very a valuable retail footprint in New Zealand but it was under pressure from other retail chain stores like Bunnings, Mitre10 and Briscoes.

"They are opening up new stores and offering products that are comparable and have a greater range. All of these things are starting to cut into the Warehouse.

"Nevertheless the Warehouse is still able to generate $1.6 billion in sales."

Lim believed the marketshare erosion was not an issue that could be arrested by rejigging the stores.

"It needs a massive change in terms of strategy that probably involves a lot of money."

Lim said the Warehouse still had a very strong balance sheet that lent itself to capital returns or dividend payouts to shareholders or to being privatised and geared up.

"The big question is whether Tindall still wants to get back into the business and make it work or whether it is easier to do a deal with someone like Woolworths."

Woolworths had shown interest in buying the business as recently as last year and was the most likely candidate as a buyer, Lim said.

Foodstuffs' decision to buy a 10 per cent stake was more of a blocking move to stop rival Woolworths.

"It was much more of a stalling game than being a serious bidder. Woolworths is still the most logical one but someone like Coles-Myer could enter the frame. They have K-Mart but don't own any supermarkets over here."

Woolworths could take a lot of costs out of the business by getting rid of its head office. Its buying power would also make the margins a lot more attractive, Lim said.

A spokesperson for Tindall said he had no comment to make on any sale talk. Tindall controls around 53 per cent of the business, which he build from one store in 1982.

Shares in The Warehouse closed up 1c at $3.63 yesterday.