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The Warehouse's purchase of appliance retailer Noel Leeming Group will help the Red Sheds secure well-known electronics brands it has been unable to stock in the past, says its boss.
During a press tour of Silverdale's new Warehouse store last month, chief executive Mark Powell described the challenges the company had faced in its attempts to secure big-name appliance brands, saying competing retailers had been pressuring manufacturers not to supply their products to his firm.
He mentioned that The Warehouse would, for example, like to stock Samsung televisions at some point.
Yesterday, Powell said the $65 million purchase of Noel Leeming Group's 92 stores, including the Bond & Bond chain, would help The Warehouse in its plan to stock more well-known electronics brands.
But the company would take "a very considered" approach, Powell said.
"There won't be a sort of wholesale move of brands from Noel Leeming into The Warehouse."
Tim Morris, an analyst at market research firm Coriolis, said the purchase was one of the best strategic moves The Warehouse could have made.
"For 20 years The Warehouse has been struggling to get big brands, particularly in electronics and whiteware," Morris said. "Now, in one swoop, they're going to get access to them."
Powell would not rule out ditching the Bond & Bond retail brand, which offers a very similar range of products to Noel Leeming, and rebranding those stores as Noel Leeming.
"We've got no firm, preconceived view [on a rebranding]," he said. "What I want from each of our retail brands is clear brand positioning and personality that the customer can understand. So going into the new year we'll look at how that all fits together."
The Warehouse said it would fund the purchase through its existing debt facilities and Noel Leeming would operate as a separate trading division under its existing management team.
Until yesterday, Noel Leeming was owned by Gresham Group, an Australian private equity firm that bought the appliance retail business from Pacific Retail Group for $138 million in 2004.
At March 31 Noel Leeming Group held debts of $113.6 million, according to documents lodged with the Companies Office.
Powell said The Warehouse had not taken on any of the debt.
"That [the debt] is for Gresham to sort out."
Powell said Noel Leeming's debt-laden capital structure was the cause of the company's $615 million loss in the year to March 31 this year.
"By buying it debt-free, from an [earnings] point of view it will contribute to our half-year results."
Noel Leeming would contribute $4 million to $6 million in earnings to The Warehouse's first-half results, the company said.
Some past attempts by The Warehouse to grow its business have failed to yield positive results. A disastrous expansion into Australia was aborted in 2005, while a move into grocery retailing was also dropped.
Mark Lister, head of private wealth research at Craigs Investment Partners, said the acquisition expanded The Warehouse's footprint but was "not a game-changer".
"It probably is an opportunity for them to grow a little bit and extract a bit of value out of what they're doing," he said.
"It's still a very tough market to be in."
The Warehouse is in the midst of a $130 million revamp of its 91-store network of Red Shed stores.
Shares closed up 10c at $3.10.
92 stores, including the Bond & Bond chain
- Christopher Adams, NZ Herald