We Discuss Why The Warehouse Group Limited's (NZSE:WHS) CEO Compensation May Be Closely Reviewed

Key Insights

• Warehouse Group's Annual General Meeting to take place on 23rd of November
• Salary of NZ$1.59m is part of CEO Nick Grayston's total remuneration
• Total compensation is 340% above industry average
• Warehouse Group's EPS declined by 12% over the past three years while total shareholder loss over the past three years was 16%

The results at The Warehouse Group Limited (NZSE:WHS) have been quite disappointing recently and CEO Nick Grayston bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 23rd of November. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Warehouse Group

How Does Total Compensation For Nick Grayston Compare With Other Companies In The Industry?

Our data indicates that The Warehouse Group Limited has a market capitalization of NZ$577m, and total annual CEO compensation was reported as NZ$2.8m for the year to July 2023. Notably, that's a decrease of 22% over the year before. In particular, the salary of NZ$1.59m, makes up a fairly large portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the New Zealand Multiline Retail industry with market capitalizations between NZ$335m and NZ$1.3b, we discovered that the median CEO total compensation of that group was NZ$635k. Hence, we can conclude that Nick Grayston is remunerated higher than the industry median. Furthermore, Nick Grayston directly owns NZ$204k worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	NZ$1.6m	NZ$1.5m	57%
Other	NZ$1.2m	NZ$2.1m	43%
Total Compensation	NZ$2.8m	NZ$3.6m	100%

On an industry level, around 47% of total compensation represents salary and 53% is other remuneration. Warehouse Group pays out 57% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at The Warehouse Group Limited's Growth Numbers

The Warehouse Group Limited has reduced its earnings per share by 12% a year over the last three years. It achieved revenue growth of 3.2% over the last year.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has The Warehouse Group Limited Been A Good Investment?

With a three year total loss of 16% for the shareholders, The Warehouse Group Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 3 warning signs for Warehouse Group that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.