The Warehouse goes from $40k to $2.2b in 20 years

By BRIAN GAYNOR

Twenty years ago today, a small 550sq m store was officially opened at 97 Wairau Rd, Takapuna. The new outlet, called The Warehouse, was Stephen Tindall's first step to becoming the country's most successful entrepreneur over the past two decades.

The Warehouse is now the country's third largest listed company and is the biggest and most successful retail organisation in New Zealand's history.

The day before The Warehouse opened, the Dow Jones Industrial Average closed at 1021 and the NZSE40 Capital Index at 565. Ron Brierley, Paul Collins, Bruce Judge, Hugh Fletcher, Bob Jones and Doug Myers were grabbing the headlines as the up-and-coming New Zealand businessmen.

Brierley was causing havoc among asset-rich, poorly performing New Zealand companies; Collins and Judge were forging a partnership at H. W. Smith; Fletcher had completed a deal to buy Crown Zellerbach Canada; Jones had just floated his property company; and Myers had been appointed managing director of sleepy Lion Breweries.

Meanwhile, Tindall invested $40,000 in his new company and took six weeks to prepare his innovative store for opening day.

On Thursday, November 18, he placed an advertisement in the Auckland Star. So many customers turned up the next day he had to open early to satisfy their interest. His sales that day were $1978.38.

On Saturday, November 20, the official opening day, the total takings were $4490.87. The group now has total sales of $4.7 million per day.

The Warehouse has developed into a firm favourite among stockbrokers and investment managers, but 20 years ago they wouldn't have gone near the company.

The Wairau Rd outlet sold cheap imported and manufacturer clearance lines, mainly soft furnishings, beddings, rugs, toys and sporting items.

The goods were laid out on large sheets of plywood or particleboard atop trestles or metal legs, or in babies' playpens.

More stores opened in Auckland.

In 1985, The Warehouse took a 25 per cent share in a joint venture with the South Island retailer H & J Smith and opened the first South Island store in Christchurch. Ownership of the South Island operations later changed, with The Warehouse and the Smith family holding 50 per cent each. A similar 50/50 joint venture structure was used to establish regional operations throughout New Zealand.

By March 1993 the company had 47 stores with annual sales of $225 million, or $600,000 a day. But the company had outgrown its joint venture structure and shareholders in the regional companies swapped equity for shares in The Warehouse.

After the reorganisation, the company offered 17.2 million shares to the public at $2.50 each and 6.4 million to staff at $1.75. The issue raised $54 million with $45 million going to the company and $9 million to existing shareholders.

Following the issue, existing shareholders held 80.1 per cent, new shareholders 14.5 per cent and employee share-purchase schemes 5.4 per cent.

The Warehouse listed on the NZSE on November 12, 1994. It traded between $2.45 and $2.48 and closed on its high for the day.

The rest, as they say, is history. Except for problems associated with a new computerised system and an inventory blowout in 1996, the company's share market value has continued to rise and rise.

The group has had two bonus issues, a one for four followed by a one for one, and no further capital raisings. The average cost of participants in the original public offering is $1 a share.

At yesterday's $7.35 closing price, it has a sharemarket value of $2.24 billion and ranks only behind Telecom ($8.9 billion) and Carter Holt Harvey ($2.9 billion), both in existence in 1982.

The only two new companies that come anywhere near it are Sky City Entertainment ( $1.7 billion) and Sky Network Television ($1.4 billion). But both had major corporate backing and operate in industries with relatively high barriers to entry.

Tindall has shown that a Stock Exchange listing can be a huge asset as far as growth and wealth creation are concerned. In its first 12 years The Warehouse turned its original $40,000 equity into $238 million.

In the eight years since listing, its value has risen a further $2004 million, including a $54 million contribution from new shareholders.

Tindall has demonstrated that the business world is full of wonderful opportunities. There is always the possibility that someone is starting a new business today that will emulate The Warehouse and be the NZSE's third largest company in 20 years.