Could moving into groceries save the Red Shed from the risk of extinction?

The Warehouse Group has confirmed it's now received a formal takeover offer from an Australian private equity firm.

It could see company founder Sir Stephen Tindall take on a greater role with the company -- potentially paving the way for The Warehouse to become a clearer third player in the supermarket industry.

Greg Smith from Devon Funds Management says it could be a smart move, as the "everyone gets a bargain" space gets increasingly more crowded.

He says The Warehouse is currently stuck in the middle between Briscoes, Kmart and Temu, so groceries may be the best way forward.