Forum Archive Index - January 2001

["Peter Maiden" <pmaiden@xtra.co.nz>]

Hi Warner - thanks for the feedback

 

The closing prices on 12/1 for the peoples picks were

 

FFS   35 - I am using only FFS assuming that there will be little difference between FFS and FFSPA over time

TEL   508

ITC   17.3

FRU   183

THL   184

 

Good entry points for all but FFS (the heaviest weighted share of the five)

 

Another subject - still looking at getting into WHS sometime? The market is getting uneasy - isn't it?

 

I couldn't work out why it got to 670 odd so quickly in December - maybe everybody was reading my posts?

 

Overall retail sales volumes are still increasing and value has been helped by price rises. No doubt margins have been squeezed a bit but I am confident that in WHS case they have managed these well.

 

The way the WHS price is going down the last few days you can bet your bottom dollar that the market is not going to be happy with whatever sales growth they report - both for NZ and Australia.

 

Australia retail scene is quite interesting. Coles Meyer seem to be used as a benchmark and they have a had a terrible time lately. Their biggest problem is where they are positioned in the market.

 

Where they are missing out is at the top end. They have finally realised that approx 20% of income earners in Australia earn more than A$105K - (from memory top 10% of NZ income earners earn NZ$70K or more) - and these 20% account for 40% of total retail sales. Coles Meyer are very weak in this area.

 

At the other end of the scale it has been estimated that bargain stores (even seen a Price Bashers in Sydney) sales are nearly $15B annually. and growing fast. Interesting that Woolworths operate some of these 'Price Basher' stores - and Woolworths is the darling of the Australia retail sector on the ASX.

 

Where Coles Meyer are struggling is that they are neither strong at the top end or (unless you count Target) at the bottom end.

 

Much the same that is happening to Farmers/Deka in NZ. They will always struggle where they are currently positioned and once again they are refocusing their efforts on the upper end - leaving even more for WHS to take at the middle to bottom end.

 

Those income levels mentioned above shows why ongoing success and growth for WHS is almost assured. The lower end of the market in NZ will continue to grow organically but will also grow becuase more and more people will find that the red sheds are the only place they can afford to go.

 

In some respects this trend is also happening in Australia. Even though there is a greater level of wealth there is a growing share of less well off people. In addition it not seen as uncool as it used to be to be seen in these stores.

 

Whatever WHS report in the next week or so I am sure the market will not respond positively. The underlying fundamentals relating to a successful business model still remain the same.

 

Warner - I think you had an entry point of 525 in mind - it wouldn't surprise me if it drifted doen somewhere near that in the next few weeks.

 

Bearing in mind that the WHS price was on its way through 525 when the Australia announcements were announced if it got down to that level again it would have to be 'where everybody gets a bargain'

 

Let's see what happens - sorry I got carried away again with WHS. Did take some profits (for the family trust) in the low 600's but definitely looking at getting more. Like you Warner it's picking the right level to maximise gains.

 

Peter