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Warehouse shares fall after $100 mln share sale

Warehouse worst performer on NZX 50 Index after trading resumes following share sale

By Tina Morrison

March 7 (BusinessDesk) – Warehouse Group is the worst performer on New Zealand’s benchmark NZX 50 Index today after the shares resumed trading following a discounted stock offering to raise money for the retailer’s expansion into financial services.

Shares in Warehouse dropped 3.6 percent to $3.48 after the retailer yesterday raised $100 million selling shares at a discount of $3.23 apiece. The shares closed at $3.61 on Wednesday before the company issued a trading halt ahead of the announcement of its earnings and the expansion into financial services.

New Zealand’s largest listed retailer said yesterday it plans to pay $3 million for the Diners Club New Zealand business to beef up its financial services offering, as part of a plan to get half its earnings from areas other than its core ‘Red Sheds’.

Warehouse is following retailers including Target Corp and Tesco as it aims to boost earnings from selling financial services and help the estimated 1.5 million people who come through its doors every year buy more products.

The company expects to have $600 million of receivables by the 2020 financial year, which it anticipates could add $30 million to earnings. The company currently generates about $400 million of receivables for third parties and its joint venture, from which it receives a small share of profits.

“To bring it in house and try and get a little more margin out of that seems perfectly logical,” said James Lindsay, who helps manage about $400 million in equities at Tyndall Investment Management. “It’s obviously another leg for operations, a strategic area.”


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