The Warehouse dips its toe in to the banking venture waters

Friday 31st August 2001

KEEPING IT SIMPLE: Bruce Gordon gears up for the launch

By Deborah Hill Cone

Listed retailer The Warehouse this week revealed its long-awaited financial services products and its new loyalty programme, Kiwi Rewards - but so far it is nowhere near being The Warehouse "bank."

From the middle of next month The Warehouse Financial Services, a joint venture with Westpac Banking Corporation, will offer two new MasterCards and a range of insurance products through the retailer's network of big red sheds.

The Warehouse already has 200,000 customers with its Warehouse store card, more than some banks have signed up for their credit cards, and will transfer those cardholders to the new Warehouse Financial Services MasterCard.

The Warehouse has talked for some time of getting into financial services, with much speculation about whether it would be as successful taking on banks as it has been in winning over retail consumers in other sectors.

But it is steering clear of transactional banking - such as offering everyday cheque accounts - presumably because the numbers simply do not stack up.

Warehouse Financial Services acting general manager Bruce Gordon said the company was focusing on simple, well-priced products research showed would be profitable.

The Warehouse chief executive Greg Muir said it was starting to trial a few products and might introduce others, such as mortgages, at a later date.

Meanwhile, the market is expecting The Warehouse to post a profit of about $62 million for the year to July 31 at its annual result announcement next week. In August, it announced group sales for the year were up 15% or $216 million to $1.162 billion.

Analysts are relaxed about the performance of the "big red sheds" in this country but are concentrating on the company's Australian operations, Clints and Sollys. They expect the Australian operation will post a small operating loss this year.

Mr Muir has identified the Australian investment community as an area the retailer needs to work on. There was little liquidity in The Warehouse shares on the Australian Stock Exchange and the company had few Australian shareholders: "It's one gaping hole," he said.

Many fund managers and institutional investors put their money on a pro-rata basis into Australian retailers such as Coles Myer and Woolworths. "Most Australian funds are index players," Mr Muir said.

Analysts said there would be more interest from Australia if the company had a higher percentage of its shares free to be traded. Founder Stephen Tindall and his interests own 54%. The shares were trading at $6.05 yesterday, down from a 2001 high of $6.32.

Comments from our readers

No comments yet