The Warehouse Group Ltd [NZX:WHS] share price has surged by 4.07% at the time of writing.

The Warehouse — founded in 1982 — is New Zealand’s largest retail group. It has a strong presence in Kiwi metro centres. The conglomerate also operates popular outlets such as Warehouse Stationery, Noel Leeming and Torpedo7.

The Warehouse share price is currently sitting at $2.30 at the time of writing, and it has a market capitalisation of $797.739m.

Why has the [NZX:WHS] share price risen?

In breaking news, the Warehouse Group has announced that it will be launching an online shopping platform known as TheMarket. This represents an aggressive push into e-commerce.

At the moment, details on a launch date remain scarce. However, TheMarket will offer a wide range of Kiwi, Aussie, British and American consumer goods to online shoppers.

Naturally enough, this announcement has created much buzz and excitement, buoying market sentiment in the process.

Where will the Warehouse Group share price go from here?

Since late 2016, the Warehouse share price has experienced a steep drop, as a tougher retail environment has cut into the company’s earnings.

In light of this trend, the Warehouse management hopes that a fresh push into e-commerce will allow the company to regain its competitive edge and reenergise its customer base.

The big question now is this: will the Warehouse Group be able to leverage its physical presence into online success?

Two key obstacles loom large on the horizon:

  1. Australian competitor Kmart is making a more concerted push into the New Zealand market. On August 15, it will unveil its first 24/7 store in Sylvia Park, Auckland. It is presumed that more outlets operating under this model are likely to follow.
  2. American competitor Costco, the second-largest retailer in the world, is due to touch down in Westgate, Auckland in 2021. Projections estimate that Costco will be able to offer prices 25%-30% cheaper than its rivals.  

These dramatic developments can only mean one thing: retail competition in New Zealand is set to heat up tremendously.

The Warehouse Group may be forced to fight an intense battle on two fronts.

While the announcement of its e-commerce platform may boost market sentiment in the short-term, long-term structural challenges remain for the company.

With investors watching closely with bated breath, a much clearer picture will surely unfold in the months ahead.


John Ling,
Contributor, Money Morning New Zealand