Warehouse announcement 'made in good faith'

Thursday, 26 March 2020

The Warehouse Group said notification to the market that it would stay open through the four-week lockdown was made in good faith.

It proved to be incorrect but resulted in a share price surge from $1.50 per share to more than $2.

Shares were then put in a trading halt and fell 17 per cent in Thursday's trading.

All the group's stores, distribution and online fulfilment centres are now closed for four weeks.

* The Warehouse share price 'likely to fall'

* Coronavirus: Five shopping centres being closed by property manager Oyster Group**

The Warehouse originally believed it was right in its assumption it could open.

'We were in contact with Government for some time and on Tuesday morning, when we confirmed The Warehouse would be open, we did so in good faith on the basis of the information we had been given from credible sources, and our strong belief, supported by legal advice, that Red Sheds (The Warehouse stores) met the criteria of being an essential service, based on the Government definition of 'any entity involved in the supply, delivery, distribution and sale of food, beverage and other key consumer goods essential for maintaining the wellbeing of people',' group chief executive Nick Grayston said.

'We understood that our significant grocery, toiletries, cleaning, warmth essentials for winter needs and our national coverage meant that we were expected to trade.

'In addition, at the time of the announcement we were working with our 12,000 team members and suppliers, who were understandably very keen to receive definitive answers around our status as a business,' he said.

'On Tuesday further conversations with various Government representatives were undertaken and we established that further clarity was needed and a trading halt was put in place as we sought more information.

'Later into the evening on Tuesday and well after the trading halt announcement, we heard for the first time the Government's direction that the Red Sheds should be closed.'

He said he supported the need to do everything possible to keep New Zealanders safe.

The Warehouse Group board has cancelled the 10 cent interim dividend for the first half of the 2020 financial year, which was due to have been paid on April 17.

The board is also withdrawing the financial guidance on this financial year's result.

Businesses that are found to have given misleading information to the stock exchange can face a fine of up to $500,000.

Dean Anderson, founder of Kernel and formerly head of Smartshares at the NZX, said it might have been presumptive of The Warehouse to assume that they could classify part of their businesses as essential, 'but you can clearly see why they have attempted to do that in terms of trying to maintain staff and everything else that they have going'.

'Everybody is obliged under the continuous disclosure scheme to make timely and accurate disclosures to the market and in this kind of environment that is extremely important.

'Though at this time, for many, it is hard to be accurate. With things moving so quickly there is an expectation that accuracy is not as high as would be in a normal operating environment,' Anderson said.