Market players call for changes at the top, saying the company’s growth strategy has failed to deliver at the bottom line

The Warehouse Group chairman Ted van Arkel says the company remains committed to its strategy amid market criticism that the retailer's long-running growth push has failed and major changes need to take place at the board and chief executive level.

Under the tenure of Mark Powell, who took the group's helm as chief executive in 2011, the firm has embarked on a five-year turnaround programme that has included a $180 million refit of its core Red Sheds stores and acquisitions such as its purchases of the Noel Leeming electronics chain and an 80 per cent stake in online sportsgear retailer Torpedo7.

But some sharemarket participants are becoming frustrated with a lack of bottom-line growth over the past few years.

On January 7 the company said first-half adjusted profit was expected to be about 20 per cent lower than last year at around $37 million, partly as a result of flat sales and slimmer margins at the Red Sheds and lower revenue at Noel Leeming.


In September The Warehouse reported an 18 per cent decrease in full-year adjusted profit to $60.7 million. It blamed the drop on costs involved in its "strategic re-shaping".

The Warehouse shares have plunged more than 35 per cent from their May 2013 high of $4.39, and closed steady at $2.75 last night.

"The current strategy, particularly at the Red Sheds, along with the acquisitions, has clearly failed," said Salt Funds Management managing director Paul Harrison. "There needs to be changes now at the board level and at the CEO level."

Harrison said he had confidence in van Arkel as chairman.

He said Salt Funds, which manages a more than $650 million equity and property portfolio, had sold all of the Warehouse shares it previously held.

"When you look at what the current strategy has resulted in, you've doubled the amount of capital invested in the business and yet profitability is still going backwards," he said. "There needs to be changes made and somebody needs to be held accountable for the clear failure of this strategy."

Milford Asset Management executive director Brian Gaynor said he fully agreed with Harrison's view.

"The share price says everything," Gaynor said. "If a company isn't performing you've got to look at the top of the tree and the board sits at the top of the tree."

The Warehouse's board members include founder Sir Stephen Tindall, who controls about 50 per cent of the business through various stakes, long-serving director Keith Smith and former Noel Leeming chief executive John Journee.

Van Arkel said the company had undergone a period of significant re-shaping over the last four years.

"This has also coincided with a period of unprecedented change within the retail sector, which has presented large-scale challenges and opportunities," he said.

Rickey Ward, NZ equity manager at investment firm JBWere, said calls for board and chief executive changes were "a little bit harsh".

Ward said challenges such as online competition had caused disruption in the retail industry.

"I don't think you can put that down to the CEO or the board," he said. "I think they're doing what they need to do and that is diversify."

James Pascoe, the retail group owned by David and Anne Norman that controls Farmers and Whitcoulls, has viewed the dip in The Warehouse's share price as a buying opportunity and increased its stake in the firm from 6.3 per cent to 7.4 per cent this week.