Forum Archive Index - September 2000

["Peter Maiden" <pmaiden@today.com.au>]

I was playing around with a model tracking retail sales in NZ ( for the boss) 
the other day but couldn't resist including WHS in the workings (for myself)- 
esp in the context of valuing high growth companies. 

Quite often the amazingly high amazon.com share price was justified on what 
share of the market they were in (if it was ever defined) they could get. 
Analysts seemed to agree that if they could get to 7-10% share of that 
(defined) market revenues could drive the earnings to support the share price 
on a more realistic basis.

In this context lets define the market that WHS is in as the footwear, 
clothing, furniture, appliance, hardware, chemist, department store and 
recreational goods retail market. These are categories for which data is 
collected by Statistics NZ. These categories make up about 25% of the total 
retail sales in this country - the rest being food, accomodation, 
hotels,cafes,takeaways motor vehicles and personal services etc.

WHS are to some extent in all that defined market. That market is $10.5 
billion. Annual compounding growth over the past 5 years has been 3%.

WHS sales in NZ are currently just over $1 billion. This gives them a share of 
the defined market of 10.2%. In 1996 WHS share of this market was 5.8%, in 1997 
6.9% and in 1998 7.9%. WHS are definitely growing share of this defined market.

Interestingly the years when market growth has been subdued WHS market share 
gains have been better than average.

On a modest market growth of 3% and with WHS only increasing market share by 1% 
point per annum sales would double to $2b in 5 years. Greater share gains means 
greater revenues etc.

In view of WHS policy of expanding in new product ranges and increasing number 
of stores and floor area such growth is very likely in NZ. The WHS business 
model certainly suggests that this will happen at the very least. It has a 
relatively small market share so the potential exists. 

Future potential is the basis of what valuations are based on these days - 
including the value of what WHS has got in the way of a business model and 
infrastructure to drive future revenues (in it's market). 

My point of view only - but seeing I had the numbers I thought I may as well 
share with those interested in WHS

Hold WHS but greatly admire what Tindall and his team have done. 

Peter



 

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