Financial Results
The Warehouse went public in 1995. Since then the stock has climbed from $1.29 to $5.54 in 2005. During 2005, the stock dropped dramatically due to worse than expected results from the Australian operation.
However, the company has not been without success. It is New Zealand's largest retailer and one of the largest companies in New Zealand in terms of annual revenue. It is well ahead of its nearest compeititors Briscoes and Farmers in terms of sales. Various different explanations have been offered for this:
- The Warehouse has always had an approach of "cheap prices everyday, all the time". Or its actual slogan "where everyone gets a bargain".
- The Warehouse benefits from economies of scale in manufacturing and logistics; the purchase of massive quantities from its suppliers combined with a very efficient stock control system help make The Warehouse's operating costs lower than that of its competitors.
- One particular aspect of the economy of scale is the aggregation effect, used in other businesses such as Bin Inn and Countdown, whereby The Warehouse sells as many different items as possible. This allows the company to grow revenue over its fixed cost base (more sales out of the same store). This is why The Warehouse began to sell low margin groceries.
Read more about this topic: The Warehouse Group
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