Great criticism C9...have you made any picks lately? What should we be putting our money into?
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Great criticism C9...have you made any picks lately? What should we be putting our money into?
THE AUSTRALIAN
Page 37 10/11/04
Discount price war warning
Katherine Jimenez
November 10, 2004
FIERCE competition in the $4 billion discount variety market is unlikely to ease next year, with Warehouse Group chief executive Ian Morrice warning yesterday that the retailer would remain aggressive on pricing as it sought to build its brand across Australia.
Unveiling another disappointing sales result, Mr Morrice, who heads the New Zealand parent company The Warehouse Group, said that a competitive market was the "kind of trading environment the Warehouse is best at".
The fundamentals of the retailer's promotional program "always remain the same", he said, dismissing criticism from some of its rivals about the aggressive nature of its price promotions.
Warehouse in Australia fights in the same bargain retail space as Miller's Retail, The Reject Shop, Coles Myer's Kmart chain and Woolworths' Big W stores. Miller's shares fell 4c to $1.24 yesterday, with Reject Shop down 9c to $2.69.
Mr Morrice said Warehouse stores were "set up to be a store where everyone gets a bargain and you can't be a store where everyone gets a bargain if you don't have very strong pricing and aggressive promotions".
In the past few months, he said, its promotional activity remained aggressive but was more focused on categories where Warehouse wanted to be recognised. Those include toys, entertainment, electronics and consumables -- which includes items stretching from lollies to shampoo.
His comments came as the parent company revealed a 2.4 per cent slide in comparable sales in Australia for the 13 weeks to October 31, compared with the previous corresponding quarter.
Top-line sales were flat at $115 million, despite an increase in retail selling space and a major overhaul of the business last year.
The poor sales numbers follow a string of bad financial results over the past four years. Warehouse reported a loss of $32.2 million in the 2003-04 financial year.
The weaker sales result from Australia was not the only black spot in the New Zealand group's overall unaudited sales result. The NZ business known as Red Shed reported a 2.6 per cent drop in comparable sales growth.
Current WHS price is starting to reflect "Where Everyone Gets a Bargain" :)
Not yet but getting there. I think somewhere around $3.30 is fair value assuming Australia is an (on)going concern. 'Course if sentiment turns nasty as opposed to just realistic then the price could go sub $3. I might be crying myself at that point 'cos I'd have probably bought!
THE KING says Dont forget they are CUM DIV 4 cents till Friday, thats NICE... [^][^][^]
Most recentlyQuote:
quote:Originally posted by CAM
Great criticism C9...have you made any picks lately? What should we be putting our money into?
NZX: MHI (from$5), EBO (from low $3,breakout $3.50), RPL (all the way..fm 29-30c)
ASX: NTG (risky but fm 4c-5c) , HWG (fm 11-12c), HWE (most recent fm 67-68c)
money into the ASX stocks with NZD high.
thanks CAM, how about yourself?
I jumped ship recently after being one of these people who had stubbornly held since about $7 in the belief that Aussie would turn around. However I get the feeling now that Oz isn't the only problem and once people like me start jumping then all those Mum and Dads who put their hard earned into this will also decide that enough is enough and take what they can get. Who will buy at the moment though?
I believe that the warehouse was a great company and filled a niche here in NZ but at the moment it is lost, here is hoping that in the future they can turn it back around.
My uneducated pick is for the SP to fall to just above $3, in fact I will go $3.11 by Christmas.
C9 I am probably a dork as well but these are the thoughts on the surface of my mind at the moment. Moved into NOG from here.
Cheers,
MPC
Bongo,
I stuck my neck out on RBD - said it was a dog, admitted I'd f*cked up, and sold my holding.... It still hasn't gone above the price I sold at.
I stuck my neck out on OTI on the ASX - said it wouldn't go where everyone else thought it would, and it didn't.
I stuck my neck out on FAN on the ASX (up over 100% from my initial purchase a year ago).
I stuck my neck out on OCL on the ASX - selling after it had jumped 40% - it then kept climbing, but has since come back somewhat.
I stuck my neck out on ARP on the ASX - and emerged with a face covered in egg [B)] - I sold just before they announced a special dividend and the price shot up by 20%. I did still make a 10% profit though... And I never said the company would not produce consistent returns.
I have stuck my neck out on UOS on the ASX. We will see what happens there.
So anyway, I think my stock-picking record basically kicks yours in the proverbial.
You claim to follow Buffett, yet obviously have not understood the concept of a margin of safety - or the idea that turnarounds seldom turn - or the idea that if you find out you are wrong, you should accept the mistake, sell, and move on to greener pastures.
Buying WHS at upwards of 20x earnings, with small possibility of large profit growth in the next couple of years was simply suicidal!
Much better to buy a company like FAN at 22x earnings (last year) with 50% profit growth the year before, and the likelihood of a further 50% rise the next year (which eventuated).
The reaction to the quarterly sales report was not overdone, because WHS is so fundamentally over-priced. You should not be paying 20x earnings for a company whose profit is dropping!
At 20x earnings, assuming no growth, a company will take 20 years to earn your investment back. That's a 5% annual return. After inflation, thats a 2.5% return! Why not buy government bonds??????????
If WHS did in fact generate 20% growth in profit, year after year, then it would justify a PE of 20.
This simply isn't going to happen. It is too big in NZ, and not competing well enough in Aussie.
The best you can expect from NZ, and I mean maximum upside, is likely to be 10% (annualised) profit growth per year - don't get confused - if WHS profits are down 20% this year, then they will need to increase profit by 60% next year to gain annualised growth of 10% (I think... My math isn't that fantastic, but you get the gist).
So Bongo, you overpaid for a company that is underperforming. Buffett advises people to pay a fair price (or preferably underpay) for superior companies, that continue to produce excellent results.
As soon as you saw WHS heading south (the company, not the share price, the two are distinct) you should have bailed. Same with RBD - although at least with RBD you had more of a margin of safety with it only trading at low PE multiples. That limited your losses.
You should only ever pay 20x earnings for a company that is truly outstanding with large growth potential. Not one that is limited to 10% max upside in its strongest market, and is struggling to compete through an over-ambitious expansion into a new market.
I guess I'm sticking my neck out on this one huh Bongo???
Also,
While I usually don't get along so well with C9 - he did do pretty well for himself on ATR on the ASX... 1000%+ in little over a year... Seems pretty darn good to me...
Personally I only managed about 300% or so... the benefits of getting in early huh? Those are the returns you get when you buy solid companies with large potential for growth trading at significant discounts to the value of their future income streams (their intrinsic value). Still much better value than WHS too - about 8x conservative projections of forward earnings, with growth looking likely into the future....
Its not too late to actually make some money on shares Bongo...
By the way, If you would like, I actually have a personal fund that I manage for some people, Email me if you would like to make a deposit. :)
Well done on SKC - you
It was on the news making a comment that WHS didn't get the killer product last Xmas, the XBox, hence didn't do well and they are hoping for a better Xmas season this time. I think it is unlikely because WHS does not have the killer product this Xmas either. It is no longer XBox. It is iPod this year! [8D][8D] Something much smaller but with a bigger price tag.
Actually TLA87...
you are right about the WB thing
At the time I was warning Bongo AND co of IRRATIONAL EXUBERANCE...the WHS was trading on a PE of 30x at its peak.
At one stage it was priced higher than the great WAL!!!!!
which was trading at 29x during the same period.
I was also told by them (incl Gerry) that Cullen would be putting LOTS of $$$$ into WHS, the price would rocket over $8, the stock would split again.....dominate Aussie....then Head of to China, or North America. anyway.
I wouldnt be rubbing it in now if they hadnt been so single minded and rude.
I stuck my neck out and opposed them, and I was definetly in the minority;)
From here, now over 1/2 of its Market cap destroyed...I think $3 will not be broken, let alone $2...however
There is no rush, thats for sure.